Home Equity Line Of Credit

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Home Equity Line Of Credit Perk up Your Greatest Asset

A person's greatest asset a home can be his ticket to greater wealth. Not too long ago, homeowners were warned of the enormous risks of touching their home equity prior to retirement. Today, however, advice is somewhat different: if you plan to take out your built up savings from your mortgage ahead of time, be sure to use the savings very wisely. Knowing when to use a home equity line of credit (HELOC) makes a big difference. Discuss these options with a responsible and reputable financial lender or mortgage company prior to embarking on this venture.

HELOC When Is The Time Right?

Are you itching to take a long awaited vacation? Or, are you hoping to start some home improvement projects? The first scenario can come back to bite you on the behind. However, the second reason not only adds value to your lifestyle but also can pump up your home's value. A home equity line of credit is not to be taken lightly; you are digging into money you're probably earmarking for your retirement years. The time to use a HELOC is not right before you plan to sell your home. Remember, you do have to pay off this second loan before you can sell off your initial loan. Also, the time to use a HELOC is when you know the project or purpose will enhance the home's value or help pay off the loan faster. Thus, using a HELOC to pay off a student loan is somewhat of a gamble. But, if you complete the degree and obtain a higher income, you are increasing your odds of paying off your loan faster.

Interested In A Second Mortgage?

This line of credit carries a slightly lower interest rate than an initial mortgage. A HELOC also has a shorter repayment period than an initial loan; five to seven years is the general rule of thumb. As wonderful as this sounds, a HELOC carries disastrous consequences if the loan is not paid off and closed prior to the end of the term. Unlike other second mortgages, a HELOC is not usually renewable. In other words, when the loan is closed, the loan is over. Some reputable lenders of a HELOC include WaMu HomeLoans, Bank of America, FHA's Energy Efficient Mortgage program, and RBC Royal Bank Mortgage Centre.