The market is recovering and as home values continue to go up you may find another resource to tap into for financial needs that may arise.

Sometimes referred to as a “second mortgage”, “equity line”, “home equity line of credit” or  advertised as a HELOC your home is an account that you can tap into.

There are a variety of terms offered by different financial institutions so I always suggest shopping around.  The amount of equity you will be allowed to borrow has many variables decided upon by the lender considering your ability to repay.

Here’s how they work…The equity in your home is the amount of money you have between the value and the amount you may own.

HELOC’s offer great convenience because the interest rate is typically lower than that of  a credit card and you are not required to use the full amount approved for at the time of signing an agreement.  A second mortgage is for a specific amount drawn at one time and set up on an amortization schedule, so they are two different products.

An example of a good use for an equity line would be to do small repair or improvement to your property.  You can simply write a check for the service and  repay according to the terms of your line.

An example of a good use for a second mortgage may be to do a large home improvement such as a room addition or a purchase of an adjoining property.  These loans are set up with principal and interest payments, a specific schedule of repayment  without t as much flexibility as equity lines.

It is  important to know that these loans will have to be paid off when you sell your home, because you are pledging the property as security.

I have often heard from home sellers who review a purchaser offer that they will not receive enough money at the sale due to the pay off of a primary mortgage and the equity line or second mortgage.  If you find yourself in that situation you have to keep in mind that you even if you feel like you are selling at a loss you are not because you already received that money.  It’s best to track your homes value to keep yourself in a positive equity state at all times.  Here is one the many links online to get an idea of your value: https://www.lendingtree.com/homevalue#/HomeValue

Also, it’s been surprising to me that some home sellers do not realize that the line of credit was a lien on their property.  With that being said it would be wise to understand the terms in full before signing any agreement, also ask about any penalties that can occur when you close them out.

Homeownership offers more than just a cozy place to hang your hat :)get a

Recent tax law change take away the  interest deduction for home equity lines: for more information on this and mortgage interest in general: https://www.forbes.com/sites/timtodd/2017/12/28/the-modified-home-mortgage-interest-deduction/#668ee0c06acf