What is a home equity line of credit?
An equity line of credit is a popular form of revolving credit in which your home is used as collateral. In most cases, credit lines are second mortgages, but every now and then, they will be in first position on title. Equity lines of credit are considered open-end mortgages and have a variable interest rate and a draw period.
What is a draw period?
The draw period is the initial specified period which you are enabled to use the credit available on your equity line. After the draw period, the remaining balance is amortized for the repayment period.
How much can I borrow?
Your credit limit is determined by taking a percentage of your homes' appraised value and subtracting the balances of any outstanding mortgages on the property. The maximum line of credit at this time is $500,000. If you qualify, the minimum home equity line is $20,000.
How do I use my equity line of credit?
Shortly after your loan funds, you will receive a book of checks that will allow you to start using your credit line.
What are the minimum payment terms?
The minimum payments during the draw period (ten years):
Interest only payments will be due each month for the amount that you accessed.
How often will I be billed?
You will receive a monthly billing statement for your home equity line.
Does my home equity line of credit have any tax benefits?
Always seek advice from your tax attorney or accountant to evaluate your tax benefits. However, in most cases the interest on your home equity line of credit is deductible up for home equity debt up to $100,000 or less and the total debt on your home is less than or equal to your home's appraised value.
What is my maximum loan line amount?
Your maximum loan or line amount is determined by a number of factors. In most cases your total mortgages, including your requested loan or line amount, can add up to 80% and in many cases even 100% of your homes' value.
What percentage of my homes' appraised value can I borrow?
The amount that you can borrow varies based on a few factors. (credit, debt ratios, and disposable income) However, most homeowners can get a loan at least 80% of their homes' value.
100% credit lines have become common for people with fair-good credit. While people with excellent credit can borrow up to 125%.
Sandy is a respected free-lance writer an account executive with Irwin Home Equity. You can also find more second mortgage related articles at Nationwide Second Mortgage & Equity Loans.
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