Home Equity Line of Credit

If you’re a homeowner, chances are that you’ve been deluged with offers from finance companies to lend you money based on the equity you have invested in your home. A home equity loan is a loan extended to you that is secured by your home. The amount of the loan is based on how much ‘equity’ you have invested in your home. The basic explanation of ‘equity’ is ‘the difference between your home’s value and how much you still owe on the mortgage’.

In other words, if you bought your home for $125,000 and put $20,000 down on it, financing $105,000, then your equity in your home on the day that you close the deal is $20,000. Now imagine several years pass. You’ve paid off $15,000 toward your mortgage – but at the same time, the value of your house has increased to $175,000. Your equity in your home is now $85,000: $175,000 (your home’s current value) – $90,000 (the amount you still owe on your home) = $85,000. A home equity loan allows you to turn the equity you have in your home into cash by borrowing money and using your home as collateral to insure that you’ll repay it. If you default on the loan, the bank or housing agency can force the sale of your home to recover its money. There are many reasons that people apply for home equity loans, though most fall into a few broad categories. The reason for taking out a home equity loan will often determine what kind of loan you apply for.

Debt Consolidation
By far one of the biggest reasons that homeowners apply for a home equity loan is to consolidate their debts. If you have outstanding debt to several different creditors at several different interest rates, it’s often to your benefit to consolidate all those loans. To do that, you can take out a home equity loan for the amount that you owe on all your debts together – or more – then use that money to pay off all your outstanding debts in full. By doing that, you trade writing several checks each month for writing one check, which is often less than the amount that you’ve been paying on all of the debts combined. This is because you’re also trading in the higher interest rates on your credit cards and loans for a lower interest rate on one loan. Chances are that you’ve also set a fixed time to pay back that loan, most often 15 years, though it could be as little as five or as much as thirty.

Home Improvements
If you want to make improvements or repairs to your home, it only makes sense to get the money OUT of your home to do it. Home improvements are one of the top five reasons that homeowners give for taking out home equity loans. If the reason for making improvements is to increase the home’s value or prepare it for a sale, then you should definitely take a look at the home improvements that return the most on your investment. In many cases, when the reason for taking out a home equity loan is to pay for home improvements, the homeowner applies for a home equity line of credit rather than a flat out loan.

Weddings, Vacations and College
Special events like weddings and vacations are the third most popular reason for taking out a home equity loan. For a wedding or other special event, where there will be multiple payments made to different merchants, a home equity line of credit is often a better choice than a lump sum home equity loan.

Hopefully you found this article helpful, it was provided by JVM Lending, the leader in CA Mortgage and CA Refinance loans.

A lot of people are facing financial problems as the credit card debt we built up over a period of time is causing us big problems now. We were encouraged and it was ok to spend on our handy credit cards and to borrow against the value of our homes when money was readily available but now things have turned sour borrowers are thought to be risky customers and our interest rates rise. We find ourselves having to cope with and manage credit card debt problems as best we can.

Debt problems have only one real solutionand that is to reduce our expenses and repay the maximum we can off of our credit card bills. It makes sense to pay as much as you can on the most expensive high interest credit cards and only pay the minimum repayment on the lower interest credit cards debt.

In the future we must plan on using our credit cards much less than we used to do in recent years. Buying with a credit card ends up costing us more thanks to the interest we pay on the debt. Start now and cut back on your spending. Stop spending on those things you do not need and pay as much as you can afford every month to end your credit card debt problems.

When the debt is paid on the most expensive credit card move all of that monthly payment onto paying off the next highest interest card. After the first card is paid off you will find the amount you owe each month reduces more quickly and the various credit card debts will soon reduce down to nothing and then you will be able to smile and you will not have the worry of all your troublesome credit card debt problems.