Your home is your biggest investment, so it is natural for you to take all the time that you need before making a decision. Before buying a house, though, you need to set a budget and know whether or not you can afford to pay for it now or over time. While there are some who pay in full for their houses when bought, there are others who pay for it over time through Home Equity Loan Credit or HELOCs. The benefits of a home equity loan are great, so if you are qualified to apply for one, you need to get on it.
For those that want to use HELOCs to pay off their home, we must first define what exactly equity is – equity, also known as capital, is the money you have on-hand for an investment. It is calculated by getting the value of an asset less the value of all liabilities on that asset.
So what is home equity, then?
To put it very simply, it is essentially the difference between the remaining balance you owe on your home and the actual value of your home when purchased. Home equity is that portion of your property that you truly “own.” Now, if you borrowed money to buy the property, you must also know that your lender also has a share or interest of that property until the loan is paid off.
So why are HELOCs the in thing right now?
Well, not everybody has the money to purchase a home just like that – while most people save money to buy a house before they retire, they often forget that there are other expenses as well, some of which include water, electricity, cable connection, etc. Needed to run a house. Also, with the unpredictable economy, keeping extra money for yourself is the smart thing to do. Hence, borrowing a certain amount of money and paying it off over time with a reasonable interest is not a bad idea. In fact, it allows you to focus on your present while building a steady life over time.
In the United States, you are allowed to borrow a fixed amount of money, usually up to eighty (80) percent of your equity with a fixed interest. Some of the benefits of a home equity loan include lower interest rates, a potential tax deduction (to be assessed by your lender), and a cash loan.
If you are qualified to receive the loan and have been approved for it, then the amount needed is given as an advance to you – you will need to sign a promissory note or a contract that will state that you will repay the loan with equal monthly payments over a given fixed term.
Always look for the best banks or lenders that you can trust since with HELOCs, you are tapping into the value of your home and your home is practically on the line if you fail to pay up. And of course, do not be hasty with your decision as good things take time. Again, do due diligence before signing up for a HELOC with any lender.
Make most of the benefits of using home equity to achieve your goals in life. Learn more at www.homeequitylineof.credit and we’ll show you how to do it.