Home Equity Loans

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Home equity Lines of Credit are an ideal way for borrowers to pay off debt, complete home improvement, or just take out cash. The interest on loans up to $100,000 is often times tax deductible, but please consult your tax advisor for specifics. The rates on Home Equity loans are variable and can and do change, but because of their tax benefits, the loans are much better than a similar credit card or auto loans which typically do not have tax benefits. Home equity Lines of Credit are in the second mortgage position, so they are an ideal addition to your first mortgage, especially if you have a rate on your first mortgage that is better than current market rates. Home equity Lines of Credit payments are interest only for the first 10 years, and during that 10 years, you can use the home equity line amount like a credit card, adding or paying down the balance as needed, and you only pay interest on the portion of the line amount that you use. After the 10 year period, the loan becomes a regular principal and interest loan, and you cannot use the line any more and you just make regular monthly payments until the loan is paid off.
Home Equity Line of Credit

For example, lets say you have a mortgage at 90% of the home value and you are paying mortgage insurance. You could take out a new first mortgage to 80% of the home value, and a 10% Home Equity Line of Credit and remove mortgage insurance.