As a homeowner, you can put your home equity to much use. Converting this equity to cash is quite easy if you are aware of your options. Here’s a look at three common financing solutions that put your home equity to good use.
Home equity loan (HEL): Working pretty much like a traditional loan, a home equity loanprovides you a lump-sum payment at a fixed rate of interest. The borrowed amount plus interest must be paid over the loan term in the form of fixed periodic payments.
A home equity line of credit more is a credit line you can get against the equity built up in your home. There is a guaranteed amount of cash available to you; you can draw from this ‘money bank’ whenever there is such a requirement. The interest is paid on the actual borrowed amount, and the rate is variable over the loan term.
You can re-borrow the money that you just paid back, using checks or cards. A majority of home equity credit lines come with a variable rate, though you can also consider negotiating a fixed rate.
Cash out refinancing: Here, you take out a new mortgage of a higher value than the amount you owe on your current mortgage, and use the cash to pay off your existing mortgage. The difference is used as a home equity loan. The interest rate on such a financing solution is generally, but not always lower than that on a home equity loan.
Also, visit our home equity line of credit page today to learn more!