Many people borrow against their equity. Two options for doing this are a traditional second mortgage and a home equity line of credit. With both methods, you use your house as collateral, which means that you risk losing your home if you can’t repay the loan according to its terms. The lender decides how much money to make available by considering, in part, how much of the mortgage debt you still owe.
Traditional Second Mortgage Loans: A second mortgage provides a predetermined amount of money that the homeowner is obligated to repay over a fixed period. Second mortgages generally come with fixed interest rates.
Home Equity Lines of Credit: A home equity line of credit is a form of revolving credit. Generally, you can borrow up to a certain amount (the “credit limit”) over a predetermined period of time (the “draw period”). The repayment terms of home equity line of credit may vary. For example, many home equity lines of credit are structured so that monthly payments cover only interest for the first ten years. A home equity line of credit generally carries a variable rate.
If you consider a home equity line of credit, you should ask the same questions about how this rate is set (and may change over time) that you would ask when considering any other adjustable-rate mortgage. If you sell your home, you will have to pay off or refinance your home equity line of credit.
As always, your thoughts, questions, or comments are greatly appreciated. Let me know if I can help with any of your Charleston SC real estate needs or questions.
Sincerely,
"Carolina Joe" Idleman
http://www.carolinajoe.com
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