Homeowners who are planning to improve their home, looking for relief from debt, or making a major purchase should consider a home equity loan.
The equity in your home is the difference between your home’s current value and the amount owed on your mortgage.
Two types of home equity loans are available… a home equity line of credit (or “HELOC”) and a fixed-rate loan. Both are for a fixed term. The HELOC loan can be used like a credit card, permitting you to borrow to a preset limit. As you pay down the loan, you can access the credit line again.
Interest paid on a home equity loan, unlike interest paid on a credit card or most other loans, is usually tax deductible. To qualify for the tax deduction, your HELOC debt must be less than $50,000 (or $100,000 for married couples filing jointly). Interest rates on home equity loans are generally higher than mortgage loan rates but usually lower than rates charged on credit cards.
Home equity loans can be a great benefit for homeowners…giving them additional financial flexibility.
