Learning more about the home equity line of credit

Why right now is the perfect time to get a home equity line of credit

Posted on 8/12/13 1:42:00 PM

Household repairs are expensive, often costing more than most people have in their basic savings accounts. College tuition is expensive, but do you really want to put crippling student loan debt on your child's shoulders as they make their way into the workforce for the first time? A home equity line of credit can be a viable alternative to give you the financing you need now.

An equity credit line is a revolving line of credit that uses your home as collateral for your expenditures. It affords you the opportunity to make major purchases, consolidate debt, pay for education and even fix your home. Interest rates are traditionally very low, and in most cases, the small amount of interest you pay may be tax-deductible. When choosing the right option for you and your financial future, it's important to consult with a professional tax advisor.

Variations
There are a number of different options to make sure your new purchase is covered. A home equity line of credit is subject to variable interest rates that ebb and flow with the financial markets. A fixed rate home equity line of credit has a flat interest rate for as long as payments are made and can provide a level of stability and mitigate some of the risk.

While an equity line of credit allows the borrower to withdraw and pay like a credit card, a fixed rate home equity loan is a similar option that offers an individual a certain amount of money payable over a fixed period of time, rather than a revolving line. Depending on the interest rates offered and the type of project you want to do, one option may make more sense than the other.

Benefits
Instead of worrying about saving up to fix your home or pay your child's tuition, home equity lines of credit offer the flexibility to pay as you go and provide the peace of mind that your next project can be completed on your schedule.

Currently, home equity line of credit rates are generally low. They offer you an incentive to take on an advantageous remodeling project now so that the benefits will last a lifetime. No matter the season, fixing your home or buying that new appliance is an investment in your financial future. Consult with a professional to determine which type of loan or line of credit best suits your needs.