Home Equity Financing
Always a wonder the difference between a loan and a credit facility? Both allow you to borrow money from the net your house as collateral and often a second mortgage. Despite sounding similar, major differences are highlighted below.
Home Equity Loans:
A home equity loan is a lump sum of money with a fixed interest rate and the repayment period. The payment consists of interest and principle and the term is 15 years but can be as short as 5 years and up to 30.
Home Equity Lines of Credit (HELOC):
This is a line of credit as similar to a credit card because tour has a balance that can be used to withdraw money within a period of time. This loan has a variable rate consisting of a margin and an index. Its margin is determined by factors such as credit score, equity in your home and the size of your loan. The two most commonly used are the first and Libor. When added to its margin, you get the interest rate. Repayment is usually done as a single term and interest is usually a balloon to 10 or 15 years.
Lines of credit mortgage that offers more flexibility in this can continue to develop the line during the withdrawal period. Your payments are generally lower because they are of interest only, but it also means that you can stay longer in debt.
With home equity loans, there is usually a premium to be insured for a fixed rate. Although their rates and payments are higher than you know what to expect each month, because your payment is fixed and is paying for the principle and interest.
When you sell the house, the balance on loans and lines of credit mortgage be paid.
If you would like more information or are unsure which option works best for you contact your trusted mortgage consultant as they’d be happy to assist. Have questions? Feel free to e-mail me at: tara.m.gore@wellsfargo.com or visit my website at: www.taramgore.com.
Please follow me at twitter.com/MissMortgagePA.
About the Author
Tara Gore is a home mortgage consultant working for Wells Fargo in beautiful historic Center City Philadelphia. She specializes in new construction financing and works closely with various developers as their preferred lender. Please feel free to contact her with questions at taramgore.com.
Should he break the savings or go to the credit facility to improve the housing finance house?
My husband and I discuss how to fund some renovation projects. He said that the use of savings, it is said that the use of a line of credit (payable in two years hopefully) I am afraid that if we use the savings will never be replaced. He does not want the debt. Any opinions?
If you have the capital and then go to the HELOC. If the home improvement will increase the value of your home is child's play. Up what you are buying a car or take a vacation with him. Leave your savings alone. … Or say you can get a HELOC @ 6% APR. Then the money in your savings account was spent at home – put that money in a CD (or some other investment vehicle) that earns interest at 6%, while this is sufficient to achieve improvements in your house for free. If you leave by 6% then see if you can get at least 6% is … and then you have more than when you sell the house because I did not pay much for improvement.
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