Getting a Home Equity Mortgage

Your mortgage counseling experience may lead you to seriously consider and apply for a home equity product such as a home equity loan or home equity line of credit. Taking advantage of the equity in your home by getting one of these products can be a great way to get your hands on some extra cash for a variety of situations or needs. Homeowners use home equity loans to:

• Consolidate debt: With the loan or line of credit, you can pay off your other debts, leaving you free to manage only one new payment in place of all the rest.
• Remodel/Refurbish the house: Now you can have the kitchen of your dreams, or build on that addition to the garage, landscape the yard, install new technology, or expand to make room for baby.
• Buy other things: Such as a new car or a trip around the world for vacation.
• Pay for education: College is expensive. A home equity product may be just the ticket for helping your child (or yourself) bear the expense.

Choosing the Right Home Equity Product

Home Equity Loans and lines of credit come in two primary varieties: the home equity line of credit or the home equity loan. Both have their advantages for the homeowner, and Mortgage Counseling recommends choosing from among the two product options based on what your specific needs for a home equity product are.

• Home Equity Loans: This mortgage product is best used when you need a quick single lump sum payment of cash such as to pay off debts or pay for repairs or to refinance your home. Your home's equity, once evaluated by a professional appraisal, will be used to secure a loan - a second mortgage for the amount that you wish to take out against your home's equity value. Home equity loans are offered at a fixed rate, so your repayment terms are clearly spelled out at the beginning of your contract.
• Home Equity Lines of Credit: Home equity lines of credit are best in those circumstances where you have expenses or need for money over time rather than as a single lump-sum payment. This product acts as a credit line opened against the equity in your home that you can use and use again as needed for as long as the credit line remains open and you adhere to the terms of your contract. The rate for home equity lines of credit may fluctuate over time and there may be other restrictions such as how often you can use, or minimum amounts that you must charge, that you will have to be familiar with. Home equity lines of credit are good for those occasional expenses such as tuition and books, when paying for a college education.