Home Equity

Get Your Home Equity To Work For You
Home equity is the difference between your home’s value and the amount you still owe on your mortgage. Each time you make a mortgage payment, your home equity inches up. And if your home’s value increases, so does your equity.

Taking Advantage Of Your Home Equity
Many people refinance their mortgage to cash out equity from their home. But there are two other options available to many people.

A Home Equity Loan lets you take out a loan for the amount of your equity. A home equity loan is a second mortgage. You get your home equity in one lump sum. Home equity loans have a fixed interest rate.

A Home Equity Line Of Credit (HELOC) gives you a source of money to draw upon as you need it. It’s a lot like a credit card; you draw money off your line of credit whenever you need it, and make monthly payments on it. Home equity lines of credit have avariable interest rate — meaning the rate you’re charged on your outstanding balance changes according to market conditions.

Why Use A Home Equity Loan?
A home equity loan is useful for paying for major expenses. These include paying for college, paying off debt, or paying for medical care. It’s also popular to use a home equity loan to pay for remodeling and home improvements. In fact, because improving your home can bump up its value, this may boost your home equity, too.

Home equity loans also close much faster than other loans, including most mortgage refinances. Home equity loans sometimes close in as few as five days.

It’s important to remember that because a home equity loan is a second mortgage, it will usually have a higher interest rate than your first mortgage. This is because second mortgages are riskier for lenders. If you want to take out your home’s equity and enjoy a lower interest rate, consider a cash out refinance. But if you already have a low rate on your original mortgage, you may not want to refinance.

Why Use A Home Equity Line Of Credit?
If you don’t need a large up-front payment, a home equity line of credit may be just what you need. Most of these programs let you draw off them using special checks — or, in some instances, a special credit card.

A home equity line of credit usually has a much lower interest rate than a credit card. But some home equity programs set a minimum amount that you can draw at a time, often a few hundred dollars.

One of the advantages of using home equity — whether in the form of a loan or as a line of credit — is that the interest payments may be tax deductible. This can make using home equity a much more desirable way to borrow money than using a traditional loan or credit card. Talk to a tax professional to learn more about whether your payments would be tax deductible.

Talk To A Mortgage Professional
So which program is right for you? The best way to find out is to talk to a qualified mortgage broker.

Mortgage brokers work with several different lenders, and can find you the right program for your needs — at the right price. And a mortgage broker can help you make sense of the whole loan process.

If you’re ready to learn more about your home equity options, talk to us now.