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A new home means a new home loan. We'll help you make the right choice. |
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Home Equity Loans
Equity is the amount of value in your home in excess of any loans owed against the home. If you need money for big purchases, for example, medical expenses and college tuition fees, and you own a home; it might make sense to take out a home equity loan. Home equity loans use your house as collateral so the interest rate is generally lower compared to other consumer loans. The amount of the loan granted and the interest rate depend on how much equity is already in the house and your credit history. Banks are more willing to sweeten the terms if you have a substantial amount of equity already in your home.
Home Equity Line of Credit
A home equity line of credit is similar to a home equity loan in that it uses the equity in your home as collateral but it differs from a home equity loan in that a line of credit is a maximum amount of money that you can borrow at any given time. You do not have to borrow the entire amount but you have it available should you need to. A line of credit makes sense in a situation where you may not need to borrow a large amount once but rather over a time period, for example to pay for your child's college education or multiple home improvement projects.
The interest rate on a home equity line of credit is lower than on consumer credit cards. Two things to keep in mind are that there are fees connected to setting up an equity line of credit and that there are tax savings associated with an equity line of credit. If you are considering a home equity line of credit, make sure you do your due diligence.
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