Skip to main content

Home Equity Lines of Credit

Have you ever looked around your home and felt it could use a little update? Perhaps the kitchen could needs new granite counter tops or maybe the bathroom is too small or even worse, the den is still sporting that shag carpeting from the 1970’s. If this sounds familiar to you but you are wondering how you might pay for the remodeling, a home equity line of credit might be what you are looking for.

What Are Home Equity Lines of Credit?

Simply put, a home equity line of credit is a line of credit secured by your home. Most homes have equity – meaning they are worth more than what you owe on them. A portion of the difference between the value of your home and the outstanding mortgage amount is the equity available to you. As opposed to receiving one lump sum of cash as you would in a home equity loan, you will have access to a line of credit, similar to a credit card.

First, your mortgage company will establish a total available loan balance from which you can draw. You can draw the amount you need or want up to the total available. For example, if you receive a home equity line of credit of $50,000.00, you can take as little as the minimum withdrawal amount and all the way up to the entire $50,000.00 or make several withdrawals as needed.

Home equity lines of credit use a variable interest rate which is often based on the current prime interest rates.

What Are Home Equity Lines of Credit Used For?

There are several uses for a home equity line of credit. Many people use them to update or renovate their homes. From a new backyard and swimming pool to updated wiring, this type of line of credit is a good option for covering the costs. In addition, some individuals use home equity lines of credit to pay off or consolidate debt from credit cards and other sources.

Another use you can use a home equity line of credit for is college tuition. This is a good option as the money will be available when tuition comes due twice a year as opposed to receiving a lump sum.

How Do Home Equity Lines of Credit Benefit You?

One benefit of home equity lines of credit is that the interest may be tax deductible. Your tax advisor can provide insight into your personal circumstances. In general, IRS guidelines allow  interest as a tax deduction as long as your line of credit is less than $50,000.00 for an individual and $100,000.00 for a couple filing jointly. If you use a home equity line of credit for any other purpose than home improvements, the interest is not tax deductible.

A second benefit of home equity lines of credit are the repayment options it affords you. You may pay a small amount of principal plus interest, which may help your monthly finances if you find yourself in a rough spot.

What Is the Easiest Way to Obtain Home Equity Lines Of Credit?

Having a good payment history is a necessity when it comes to obtaining a home equity line of credit. Like any home equity loan, certain criteria must be met before a bank or mortgage leader will grant you a line of credit.

If possible, review your credit score and clean up any inaccuracies. Be sure all of your payments are on time and above the minimum payment to improve your overall credit standings.  Your debt does not need to be entirely erased, however, all of your credit accounts should be current and in good standing. Secondly, ensure you have a solid employment history. Typically, lenders like to see at least two years of employment at your present company.

Once you feel you have your financial house in order, contact your current mortgage holder or the bank from which you obtained your original loan. Having a personal relationship with your banker or mortgage lender can aid in obtaining the home equity line of credit you are looking for. A local bank has a personal stake in the community, and that might make it easier for you when going through the loan process.

Home equity lines of credit can be a ready source of money for home improvement projects, both large and small. Whether you need a new roof, or plan to finish your basement, a home equity line of credit can help you increase the current value of your property. With a little planning and research, you should be able to find the right home equity line of credit for you.

This post was written by Holly Wolf of Conestoga Bank, a community bank servicing Philadelphia and its surrounding regions for over 120 years. This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.


Popular posts from this blog

Low interest credit cards - how to make them work for you

Credit cards are borrowing instruments, unlike debit cards where you already have the money. Banks are there to make money too. Just like high street stores, they hope to maximise their profits within the rules. So it’s important to understand the basics and find a credit card that’s right for you – you can compare low APR credit cards here . Now you know the rules, let’s find out how to play the game. The financial services industry charges interest on the money that it lends out. Let us assume you borrow £100 on your credit card and keep it for exactly one year before you pay it back. For the purposes of this article, we will assume your loan attracts 8% interest per year, which is the Annual Percentage Rate, or APR for that particular transaction. Practical example

Why it’s important to save for retirement

While retirement may seem far off in the distance for some, financial experts say you’re never too young to begin saving.  In fact, the earlier you calculate your retirement needs and start building your nest egg, the easier it will be to create a viable plan for the future. Many experts advise you begin saving a percentage of your income for retirement as soon as possible, no matter how little the contribution may be, as it’s possible the Social Security benefits millions of people currently depend on may be in jeopardy.

What are the Consequences of Overspending in Life?

How overspending can ruin your financial life? With today’s expenses and their prices, it can be very hard not to overspend. Still, that isn’t an excuse to stray out of your budget. You know why? It is because overspending can only lead to more problems than you think. Overspending can affect your whole life. With all the possible consequences, it may jump from one problem to another. Unpaid bills All the excessive shopping with your credit card can cause steep bills at the end of the month. If you keep on using your credit but don’t have enough money to pay for it in the end, then you’re surely in for a huge financial disaster. This will turn out to be missed payments, and missed payments will ruin your credit report. Missing out on payments will get your credit report marked for 7 years or more. And you can’t get rid of them by finishing them off. Credit report Overspending can cause a chain reaction of events. Once you get your bills due to overspending, it’s possible for you to mi

The Top 4 Reasons People Fail at Budgeting

Budgeting isn’t easy, and many people experience difficulty trying to get the most out of this essential financial tool.  While the concept may sound simple, adhering to your budget could be a lot harder than you might think.  To help you experience success, here are the top 4 reasons why people fail at budgeting .

How does a Prepaid Credit Card work?

Can They Really Be a Solution to Avoiding Credit Card Debt? When it comes to plastic, there are a lot of choices out there. Not only do you have the choice of credit card , debit card, or prepaid credit card, but you also get to decide which financial company you want to use as your card provider. Credit cards and debit cards are both risky. Credit cards can help put you deeper into debt, while debit cards give thieves and collectors access to your entire bank account. A growing number of people are finding that prepaid credit cards are becoming the best option. What Are Prepaid Credit Cards? Prepaid credit cards look and act just like a credit or debit card, except you put the money on the card before you make any purchases. You are only allowed to spend as much money as you have pre-loaded on the card, which means that you are not at risk of going into credit card debt from overspending. These cards also keep your money safe, because thieves will be limited to the amount that is on t

How to Make Your Title Loans Safe and Sound

Although title loans are tagged as risky, innumerable folks still use them for fulfilling their different financial obligations. Therefore, such loans are not completely bad because their significant use despite the risk factor says a lot of their pros. This makes it vital to discuss how these loans should be used so that the risk factor can be minimized up to a great extent. For those who are not aware of, the risk of title loans crop up in the form of consequences when you fail to pay back the loan. With such a failure, you are surely going to lose your car as well as decrease your credit score further.

How Equipment Loans can help your Business Thrive

Image via gettyimages Different companies enjoy common benefits from capital equipment. Machinery has direct and indirect effects on your bottom line. A new oven and forklift each make your business more productive. Meanwhile, interest and depreciation expense are tax write offs that indirectly improve business profits. However, your business may not qualify for a general purpose loan to buy much needed equipment. Some obstacles include: