Equity Line Of Credit Loan Provides Access To Home Equity

2007-03-08 10:33:40

( Financial )



Equity line of credit loan is one which the lender provides you a maximum revolving line of credit secured in equity of owner-occupied single-family homes, townhouses or condominiums. With equity lines of credit, you pay interest on the amount that you actually draw. This type of loan bases its variable interest on the prime rate.

The life of equity line of credit loan is typically between ten to fifteen years. Within this period, you'll have the option of either paying only the interest or the regular amortized payments. At the end of the period, the lender will convert any remaining balance of the equity line of credit loan into a standard loan.

To get approval of your equity line of credit loan, lenders will ensure that your financial capability, property's appraisal value, and legal title to the property are acceptable to their standards. If the lender approves your equity lines of credit, you need to pay closing costs which include points, credit report, appraisal fee and insurance premiums. Lenders will then place a second lien on your property equal to the maximum line of equity, which is junior to that of the original mortgage loan.

Equity line of credit loans are usually suited if you are preparing for the college education of your children. This allows you to draw loans as you need money to pay for tuition and other expenses each semester. Equity lines of credit are also applicable in cases where you are refinancing your accounts for credit cards and similar consumer credit.

However, before you take out an equity line of credit loan, you may want to explore other financing options. Although interest payments on equity lines of credit are tax deductible, you should note that you can take advantage of the tax break only if you select itemized deductions when you file your tax return.


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