Home Equity Line of Credit Information

     Home equity lines of credit are generally entered as a first or second mortgage against a mortgagor’s property and allow consumers to tap into the equity in their home on revolving basis. Home equity is the difference between the home’s present market value and the balance of any outstanding mortgages or liens. Such equity is generally acquired as a consumer pays down principal on their first mortgage or as the value of the home rises while the mortgage balance remains constant. Generally requiring minimal payments (normally close to interest only), these lines of credit normally have an adjustable rate indexed to the prime rate or other standard. As they are secured by real estate below prime rates are available based on creditworthiness. These types of lines of credit are useful for debt consolidations, home improvements, college expenses, individuals with seasonal employment, etc. A home equity line of credit generally takes the form of a second mortgage; however, in the case of a home with a clear title an equity loan would take the form of a first mortgage.

Do not make assumptions. If you are unsure about anything...
ASK YOUR MORTGAGE COMPANY QUESTIONS!

1. Inquire about all fees and costs associated with this loan, including the home equity line interest rate and APR (annual percentage rate). 

As with any residential home loan....

2. Do not assume that the interest of this loan will be tax deductible. Consult a qualified tax advisor for potential tax benefits.
3. Be sure to ask if there is a pre-payment penalty (prohibited by law in some states) for paying off the loan too early or making substantially large payments against the principal.