Thursday, September 06, 2007 8:20 AM
Home equity loans?
Every time you make a mortgage payment, you?re putting money into your own pocket, but it?s not exactly like a checking account because you can?t take it out unless you sell your house. In the interim, however, your bank can loan you money based on the amount of cash you?ve put into your pad. The process is just like taking out a loan, except that your collateral is easy to assess.
The bank will do an appraisal of your property to figure out its value, and then will calculate how much equity you have in it -- which takes into consideration your down payment, your payments to the principal and any increase in value in the property. You can take out the money in a lump sum, called a home equity loan and also referred to as a second mortgage, and pay it back with interest payments. Or you can get a line of credit, where the bank makes the money available to you for a certain time period and you make payments on just the amount you actually withdraw.
As with mortgages, these loans come with fixed rates or adjustable rates, and also come with closing costs and fees. On a good note, however, the interest may be tax deductible, just like on your regular mortgage.