Credit Talk

A home equity line of credit has a variety of plans for you to choose from whatever meets your financial needs.

Due to the continuous rising of market value of homes today, more and more lenders are offering home equity line of credit.

Home equity line of credit is actually the same to a credit card in which you have an upper spending limit against which you can draw as needed. But the difference is that it is secured by the equity in your home. Since the home is likely to be your largest asset, many homeowners use their home equity line of credit for major items such as home renovations or improvements, education, or medical bills and not for usual expenses like shopping, grocery, or dining.

With a home equity line of credit, you will be approved for a specific amount of credit, which is your credit limit or the maximum amount you may borrow. A lot of lenders set their credit limit on a home equity line of credit by taking a percentage, for example 80 %, of your home's appraised value minus the balance to be paid on the existing mortgage.

Here is an example used to compute your potential credit:

Your home's appraised value: $100,000

Percentage: x 75 %

Percentage of appraised value: $ 80,000

Minus the balance owed on mortgage: $ 40,000

Your potential credit: $ 40,000

A home equity line of credit sets a fixed period of time at some point in which you can borrow money, for instance 10 years. Once approved for a home equity line of credit, it's likely that you will be able to borrow up to your credit limit whenever you want it.

If you are considering applying for a home equity line of credit, look for the plan that best meets your specific needs. The APR for home equity line of credit is based on the interest rate alone and will not reflect the closing costs and other charges and fees.

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