A home equity, the large lump of money the bank can lend you after the mortgage loan, should never stay in the bank if you have a need. Maybe you need to upgrade your security system, to furnish the garage or do a total makeover; this money can help you a lot. And if you had no idea the banks give loans even in the presence of a mortgage, then you can start applying for one.
A Home Equity Line of Credit on the other hand makes processing of the cash even faster. However, banks rarely give out the cash in a wholesome amount. Instead, banks give you what is known as a checkbook, alternatively called a debit card. From then on, you can withdraw the money in small bits as you please. The good thing with a HELOC line of account is that you can withdraw your equity whenever you feel like without worrying about fluctuating prices. That also means that this type of account offers more freedom to the borrower than a conventional bank loan.
On average, the account allows you to borrow as much money as the bank can approve of you and then pay back over a period of not more than 25 years. The first five years is often the time limit to withdraw as much money as you can whereas the next ten to twenty years are taken as the repayment period. Once you are done withdrawing the amount in the first five years, the payment of the principal amount plus the interest rates begin. Usually, the repayment is broken down to monthly installments. However, note that the HELOC accounts do not have periodic interest rate caps like the conventional loans.
On the other hand, HELOCs are very important when you have other forms of debts or when you have a home project you wish to start. They provide the flexibility and ease of getting the cash few other types of loans can, and besides they can also be used as purchase cash mortgages. In simpler terms, this means that a HELOC can be used as a down payment whereby the borrower pays interest from it from the start. HELOCs are also cheaper as a purchase money home equity because their total interests are lower when compared to fixed second mortgage loan. Additionally, these loans lack a prepayment penalty which is the case with normal second mortgage loans.
Like you probably know, a home equity is the best option to people with minor home projects like remodeling. It allows you to get the cash easily, invest it in your projects and then start paying for it over time without having to worry about fluctuating rates. With the help of a HELOC account, you get to decide how much you get, when to withdraw it and only pay back for what you intended. Finally, for best deals on getting a home equity, always seek credit union financers before heading to the banks.