Introduction
A house gives people both physical and emotional security as well a sense of belonging and something to call their own in this vast earth in which they own nothing else but the air in their lungs and their dreams in the night. However, apart from being a place where people can find comfort and bring up their families, a home can also be a source of help during a time of emergency or when you need money to offset huge medical bills or pay your children’s tuition through an equity home line of credit.
History
Equity home line of credit is a type of revolving credit in which you offer your home as collateral for a loan. It is usually used for major payments and it is not advisable to take an equity home line of credit to use for your daily expenses because once you forfeit payments, you may lose your home. A homeowner who decides to take an equity home line of credit is usually allowed a certain credit limit which is calculated using parameters such as the current value of the home as well as any existing balance on the mortgage payments.
Features
There are several things that a home-owner must know before taking an equity home line of credit in order to ensure that they get the best out of the credit. The first thing to note is that equity home line of credit does not have fixed interest rates and instead the rate of interest is usually based on a public index. This means that the rate changes over time, and therefore, it is paramount for a homeowner to know which index is used by various lenders, as well as how often the value has changed in the past and the maximum rate it has ever reached. This will allow you to choose the best lenders to borrow from as well as to plan on how you will repay your equity home line of credit.
Tips and comments
Applying for an equity home line of credit can be a costly affair depending on the lenders that you get your credit from, and it is important that you ask upfront for all the charges that you will require to pay while applying for the credit. This is because, most of the time, the charges of applying for an equity home line of credit are the same as those of purchasing a house such as application and property appraisal fees. Other lenders will also require you to pay for closing fees that include insurance, taxes as well as attorney fees. It is important to note that under some agreements, you may not be allowed to rent or lease your home during the draw period and it is therefore important to read the terms of the agreement carefully. However, on the upside, the interest charged on an equity home line of credit is substantially lower than that charged on other lines of credit and the credit limit is usually high considering that one of the most valuable assets, that is, your home, serves as collateral.
