Home Equity: What is it, and how can you make it work for you?
Equity is the difference between how much your home is worth and how much you owe on your mortgage. A home equity loan or line of credit allows you to borrow money using your home's equity as collateral.
A home equity loan or line of credit is a second mortgage that lets you turn equity into cash, allowing you to spend it on home improvements, debt consolidation, college education or other expenses.
Two types of home equity debt:
Home Equity Loan
A home equity loan is a one-time lump sum that is paid off over a set amount of time, with a fixed-interest rate and the same payments each month.
Home Equity Line of Credit (aka "HELOC")
A home equity line of credit has a revolving balance, and a variable-interest rate that fluctuates over the life of the loan. A HELOC allows you to borrow up to a certain amount for the life of the loan - a time limit set by the bank. During that time, you can withdraw money as you need it. As you pay off the principal, you can use the credit again.
Both are referred to as second mortgages, because they're secured by your property, just as your primary mortgage is secured by your property.
A Personal Banker can answer all your questions and help you leverage the equity in your home.