Home Equity Loans and Lines of Credit
Posted by Manju in Real Estate
These types of loans allow you to borrow money using your home as collateral, and can be taken out even if your home is already mortgaged. With a home equity loan, the amount you borrow is advanced up front, when you take out the loan. The line of credit, on the other hand, works in a fashion that is similar to a credit card—you have a maximum amount you can borrow, but when you choose to borrow the money is up to you.
Both types of loan allow you to exchange the equity in your home for cash, and allow you to borrow an amount of money that is calculated on a similar basis. Most lenders will lend up to 75% of the homes appraised value, less the balance owed on your mortgage. For example, if your home is appraised at $250,000 and you owe $100,000 on your existing mortgage, you may be able to borrow $250,000 x 75% - $100,000, for a total of $87,000.
This may be a great way to leverage your home for financing purposes. Learn more about lines of credit and mortgage rates at ShopRate.com, a great site to educate consumers on the mortgage process.