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Home Equity Loans are second mortgages on real estate that allow you to use the equity in your
home as collateral. Home Equity Loans can be great tools for consolidating debt, conducting home
improvements, paying for great vacations and other activities, paying for college tuition, paying
off medical expenses and more.
Home Equity Loan or Home Equity Line of Credit
Home Equity Loans can be obtained as one lump sum loan or a home equity line of credit (or HELOC).
A home equity loan is a simple loan with terms that can range from 5 to 30 years. For most purposes,
a home equity loan will work the best.
A home equity line of credit works like a credit card with a much lower interest rate. With a home
equity line of credit you have a maximum amount that you can withdraw, but you can withdraw any amount
up to that amount at any time. If you don’t need all the money at once, or need the money to make other
installment payments, a home equity line of credit may be the right choice.
Home Equity Loan Rates
Interest rates on home equity loans are usually higher than normal first mortgage rates. Since home
equity loans are second mortgages they are considered riskier than first mortgages which usually requires
a higher home equity rate.
However, home equity loans are real estate mortgages and therefore the interest is tax deductible*.
So using a home equity loan to pay off and consolidate other debt typically makes sense for most
borrowers.
* Consult a professional tax advisor about tax deductibility.
Amerisave and all affiliated companies make no warranty and take no responsibility for the
accuracy of the information found on this website.
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