How do Home Equity Loans work and what is the difference between a loan and line of credit?
Home equity loans give homeowners the option to borrow money using your home’s equity as collateral. Equity is the difference between how much the home is worth and how much you owe on the mortgage (or mortgages, if you have more than one on the property). For example, if a current appraisal on your home indicates a value of $215,000 and you owe a first mortgage balance of $110,000, then the available equity in your home could be $62,000 if Loan to Value (LTV) were 80%. A home equity loan or line of credit is an additional mortgage allowing you to turn your home’s equity into cash to spend on home improvements, debt consolidation, college tuition, and other expenses. There are two types of home equity debt: home equity loans and home equity lines of credit, also known as HELOCs. Both are considered mortgages since they are secured by your property, similar to your original or primary mortgage. If you need a set amount of money for a specific purpose, such as an addition to your home, t
