Home equity credit lines offer a re-usable
credit account secured by placing a second lien on your home. Payments are subject to
change because equity credit line rates can be adjusted every
month, based on an index, usually the prime
rate as published
in the Wall Street Journal.
Interest
accrues only on the
outstanding balance of the account as you withdraw money, instead of
accruing on the full available balance, as in a fixed
loan. Withdrawals from your home equity credit line can be made in variable amounts.
Looking for a high loan to value home equity credit line? Some credit unions and banks are offering loans and credit lines with no equity to qualified borrowers. See 100% home equity loans.
Each lender has
different guidelines, including options like zero
costs, and no fee home equity lines. Some lenders will offer a maximum loan to
value of 70%, while others offer 90%. The maximum credit
lines can be as much as $300,000.As a general rule of thumb, most
home equity credit lines are
only available for owner-occupied single family homes, condominiums,
and town homes.
Home equity credit line terms
typically offer you the choice of
making either interest only monthly payments, or fully amortized
payments. There is a draw period of
10 to 15 years, during which you can withdraw money from your
credit line. After the draw period is over, the account automatically converts to a
fully amortized home equity loan for any remaining balance.
When comparing home
equity credit line rates and terms, remember that a lower margin means lower payments
at each rate adjustment, because the rates are calculated by adding the index to
the margin, which is a fixed
number set by the lender.
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