Your home is likely your greatest asset and you can put its value to good use with a home equity line of credit.
Banks will usually extend a line of credit to you depending on how much equity you have accumulated in your home. The total credit they will grant you can vary, however, the average is about 60% of your equity. For example, if your home is assessed at $400, 000 you could qualify for a line of credit, to be used for whatever you wish, of $240, 000.
If you still owe money on your home, that amount will be deducted from the assessed value and you’d get 60% of the difference. Take that $400,000 home and say you still owe $150, 000 on the mortgage. The difference is $250,000, so the bank would grant you a $150,000 line of credit. However, if you have a high debt load in other areas, you may qualify for less.
The probability of having your line of credit approved is very high, as long as you’re in the bankers good graces and your credit score is good. Even though it’s your equity, the line of credit is treated like a loan which you must pay back. However, the interest rates are far lower than a bank loan or credit card. It’s the most inexpensive way to take out a loan.
Once you have borrowed money using your line of credit, you must make a minimum monthly payment, which is generally the amount of interest on your outstanding balance. You can pay it all off if you wish, as long as you make the interest portion of the loan. The line of credit can be paid back when the home is sold.
You can access your equity by check or by transferring between accounts. However, the smart way to use a home equity line of credit is to save it for major purchases. Should you get into financial trouble, your line of credit can be used as emergency cash. However, you can purchase a vehicle, take an amazing vacation or make your equity work for you by purchasing a revenue property, vacation home or mutual funds and other types of investments.
You may wish to purchase a second home, a revenue property, mutual funds or other investments. Rather than take out a loan for a big ticket item such as a vehicle or even a once-in-a-lifetime vacation, using your equity line is the preferred way of borrowing money because the interest rates are so cheap.
The author has been in the Florida real estate business for more than 20 years, so before you look about getting a loan you should swing by her site to read further articles that cover Florida home equity line of credit and Florida HELOC rates.
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Tags: Florida home equity line of credit, home equity line of credit, Mortgage, mortgage loans, mortgage refinance