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Home Equity Line Of
Credit
Apply Now! Home Equity Loans up to 125%
A home equity line of credit is a
form of revolving credit in which your home serves as collateral.
Because the home is likely to be a consumer's largest asset, many
homeowners use their credit lines only for major items such as
education, home improvements, or medical bills and not for
day-to-day expenses. With a home equity line, you will be approved
for a specific amount of credit--your credit limit, the maximum
amount you may borrow at any one time under the plan. Many lenders
set the credit limit on a home equity line by taking a percentage
(say, 75 percent) of the home's appraised value and subtracting from
that the balance owed on the existing mortgage. For example,
| |
Appraisal of home |
$100,000 |
| |
Percentage |
x75% |
| |
Percentage of appraised value |
$75,000 |
| |
Less mortgage debt |
-$40,000 |
| |
Potential credit line |
$35,000 |
In determining your actual credit
limit, the lender will also consider your ability to repay, by
looking at your income, debts, and other financial obligations as
well as your credit history.
Many home equity plans set a fixed
period during which you can borrow money, such as 10 years. At the
end of this "draw period," you may be allowed to renew the credit
line. If your plan does not allow renewals, you will not be able to
borrow additional money once the period has ended. Some plans may
call for payment in full of any outstanding balance at the end of
the period. Others may allow repayment over a fixed period (the
"repayment period"), for example, 10 years.
Once approved for a home equity
line of credit, you will most likely be able to borrow up to your
credit limit whenever you want. Typically, you will use special
checks to draw on your line. Under some plans, borrowers can use a
credit card or other means to draw on the line.
There may be limitations on how you
use the line. Some plans may require you to borrow a minimum amount
each time you draw on the line (for example, $300) and to keep a
minimum amount outstanding. Some plans may also require that you
take an initial advance when the line is set up.
Apply Now! Home Equity Loans up to 125%
This information is
adapted from "What You Should Know About Home Equity Lines of Credit
When Your Home" published by the Federal Reserve Board and the
Office of Thrift Supervision.
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