Please educate me on home equity lines of credit? pros and cons?

Answer 1

Pros: Flexibility and tax-deductible interest. In most cases, and this differs slightly from bank to bank, they last for 20 years, you get to use them like a credit card for the first 10 years, and repay for the following 10.

Cons: They're tied to the Prime Rate, which is higher than mortgage rates, you only get to use it for 10 years, counts as a second mortgage, and it's generally more expensive than just refinancing your first mortgage with cash out.

Answer 2

Home equity line of credit can be good for only really one reason there are no closing cost and the bank usually will do the appraisal. here is some advice for you.
1) Take it out, if you know you will be getting the money to pay it off ( not will be paying it off as a regular mortgage) Because lines of credit are just credit cards on your house the payments are based off of just interest. Often they are only fixed for a given period of time. Most likely you want a line of credit because you want to take equity out of the home but would like to avoid certain cost associated with refinancing. This is not a bad idea. Unless Like many people I deal with on a regualr basis. People take out lines of credit until they hit their adjustable and then they refinance the second to lock into a fixed rate. The only difference is they have prolonged the obvious and for whatever period of time they have held this line they have not seen a decrease in the balance. Waste of money! Regardless of your decision feel free to log onto http://www.justgetaloan.net for fast free pre-qualification. Our bank will give you the best possible deal available. Also you can contact me at 866 530 7300 or by email [e-mail]

Answer 3

Whatever you do, remember this giant CON.

If you should default on any loan other than home loan, home equity loan, or file a bankrupcy, you are guranteed to not lose your house. This is because in most states in the united states, your primary residence can not be taken away.

If you should default on home equity loan, such protection is not in force because you agreed in writing to put your house as a collateral. Your bank will quickly take our house to satisfy the debt. This is why bank will give you the credit for amount up to the present equity (the amount you own) of the house.

Unless you can gurantee yourself that you can make the payment in full, you should not consider using the home equity credit.

The benefit of course, is the interest rate. Because interests are tax deductable in most instances, your effective rate is the posted rate minus your income tax rate. Which is lower than many of the consumer loans.

In many equity loans, you can have a choice on how you want to pay it back. Interest only, interest + principal but use the variable rate, or use the fixed rate. Check your back for details on this.

Answer 4

That is a great question...
1st, ask yourself why are you thinking about taking another loan out on the same property that you owe on?
I would not recommend a home equity line of credit to anyone...The rate are way to high and it is just like a credit card...If you do not pay down your balance it just stays the same...The only good thing is it is a huge tax write off......But why pay more interest?
I recommend to everyone, if you do not have the money and can not save it, you can not afford it! Plain and simple......
I have one when I purchased my 2nd investment property and it is killing me to pay it off....
Good luck

Answer 5

Pros: reasonable interest rates, reusable after paying it down, only pay interest on what you take out so if you don't use the credit line it doesn't cost much to have it and is a great safety net.

Cons: adjustable rates can cause payment to rise.

Here is some additional info. Hope this helps.