Home Equity Line of Credit for Home Improvement Projects
“home equity loan” “equity home line” “credit equity line” “consolidation loan” “debt consolidation credit”
Home Equity Loan or Home Equity Line of Credit to Double as a Home Improvement and Debt Consolidation Loan
With any remodeling and construction projects you do on your home there are many payment options available for most home improvement remodeling projects. For example, you can get your own loan such as a home equity loan or credit equity line or ask the contractor to arrange financing for larger projects. For smaller projects, you may want to pay by check or credit card.
For the larger projects a home equity loan, or a credit equity line also known as an equity home line of credit, can be a good solution because the interest rates are often better than other types of loans or credit and, depending on the amount of equity you have in your home, you might also be able to use it as a debt consolidation loan at the same time to pay off high interests credit cards and other high interest debt so you can be relatively debt free with just the equity home line of credit at a lower interest rate and improve your home and bring up its value at the same time.
What is the Difference between a Home Equity Loan and a Home Equity Line of Credit?
A home equity loan is a loan that is secured by your home. It is also sometimes referred to as a closed-end home equity loan or a second mortgage and is a fixed amount of money that must be repaid over a fixed term just like your original mortgage. You get the entire loan amount upfront all at once. You have predictable, consistent monthly payments.
A Home Equity Line of Credit (or HELOC) in many ways is similar to a credit card. It is a a form of revolving credit in which your home serves as collateral. You can borrow as much as you need, whenever you need it, by writing a check as long as your total borrowing does not exceed your credit limit. Because it is a line of credit, you make payments only on the amount you have actually borrowed, not the full amount available. What makes a Home Equity Line of Credit so popular is that interest paid is usually tax deductible under federal and most state income tax laws.
Whether you use a home equity loan or a home equity line of credit for a home improvement project or as a debt consolidation loan or both it’s a great way to make your debt tax deductable and improve the value of your home at the same time.
Planning a kitchen remodel?
Add Me as a Friend on Facebook CLICK HERE!
Tags
Remodeling Costs, Remodeling Houses
Many people don’t realize that they can use a home equity line of credit to do their home remodeling or home improvement.
For many this is the best way that they can achieve the remodeling of a particular area of their house such as adding a designer kitchen or even the costly conversion of a loft for example. There are ways to complete your home renovation whether you are intending the renovation for sale or for your own purposes so you don’t always have to be put the thought of having to come up with all the construction funds up front.
Regards
Chris
A Home Equity Line of Credit in many ways is similar to a credit card. At closing you are assigned a specified credit limit that you may borrow up to (this is not a check).
A draw period usually lasts anywhere from 5 to 25 years and allows you to borrow HELOC funds whenever you feel the need; you’re only required to pay back the amount you use plus interest.
I opted to use my credit card when I was having some remodelling done in the kitchen. Luckily it was not that huge a project but it sure caused quite a dent on my credit card statement. Later on I realized I should have opted for a home equity loan. Luckily I am now taking a debt consolidation loan to ease my worries.
i would have opted to save some money and then remodele my house.. well save a moderate amount and then go for the loan..but with the home equality things change.. i think its easier..
Great explanation on the difference between a home equity loan and a home equity line of credit. With money being cheap and Real Estate being done across the country now is a great time to invest in Real Estate by putting money back into our homes.
Whilst a home equity loan sees a tidy solution as it can be an extension of the mortgage (with some lenders) be aware that like the mortgage that some products limit the flexibility of repayment, whereas credit cards will allow you to repay earlier with no penalties. It is the length of the loan which really proves costly so the felxibility of repayment is essential in reducing the loan cost.
Well pre-paying with no penalties should always be worked into the terms of the loan and generally with most equity lines of credit there usually aren’t any pre-payment penalties with most HELOC’s that I’ve seen…that’s why they’re more convienient and desirable over re-doing the entire mortgage which sometimes does have pre-payment penalties unless you pay extra points for no pre-payment and also keep in mind there is no tax deduction for credit card loans but with mortages and equity lines of credit the interest is currently tax deductable.
So things like paying off non tax deductable debt with an equity line of credit can consolidate debt with usually a MUCH lower interest rate than credit cards and the interest on the consolidated debt becomes tax deductable…so you save on both the amount of interest you are paying and the amount of taxes you pay as well.
Excellent eye-opener, but the question that remains is; How easy (or rather difficult) is it to get a HELOC these days?
as long as you excercise control with the money you get from the equity loan it’ll make your value go up. it’s a great thing
This is something that is great and also bad for home owners, as this can get out of control, some home owners have to have big control over their spending because this can spiral out of control. I just think that in these financial times with the recession one should rather save then put themselves into more debit.
To my mind Heloc is 10 times better than a home equity loan nowadays. Because if you are taking the whole big sum at once, you can easily forget about looking at prices and calculating your expenses. You wil have a big sum of money and you will think about better materials for house remodelling and so on. What about HELOC, you will know that every sum that you take, you will have to pay back soon. You will calculate your expenses and buy everything carefully.
If you have a HELOC, go draw as much money as you can out of it — the banks are just closing these without notice for people nowdays.
Hurry!
We’ve found clients are having hard time getting financing these days, so any other available options are always good to know about. But even these days home equity lines are closing up. So where are clients to turn to get financing? Credit cards? Hopefully the credit markets open up again.
Tiffany that is some great information thank you so much for sharing that, so using HELOC this why its a loan that has to be paid back and this will also help people from over spending.