Home equity lines of credit have emerged as a new option in the world of finances. A Home equity line of credit also known as HELOC, is a line of credit that is based on a fixed maximum amount. Under a home equity line of credit the borrower has the option to borrow any amount up to the maximum limit. You can repay it in small installments that can be as small as the interests on the money borrowed and as big as the whole amount. At any time, you can withdraw money again always up to amount limit. Uses of Home Equity Lines of Credit There are different uses for home equity lines of credit. At any time you can use the funds to pay for expenses, repay your debt consolidation or consolidate your debt, to pay the tuition fees of your college, to book your new car and other such expenses. Apart from that, when you go in for home equity line of credit, you get the leverage of major deduction in taxes. The interest rate of the home equity line of credit is much lower as compared to credit cards. Maximum Amount Limitation When you go in for your home equity line of credit, you are allowed to borrow up to a maximum amount. The lender judges your maximum amount by analyzing your credit worthiness. The maximum amount to be borrowed through the home equity line of credit also depends on the lender. There are some lenders who lend up to 80% of the appraised value levied on your house. The amount includes your first mortgage, and your home equity line of credit too. Home Equity Line of Credit Repayment A home equity line of credit can be repaid in several ways. Each month the lender fixes a certain percentage of the principal amount, plus the interest rate for that you have to pay as your monthly payment. However, the interest rates levied on the home equity line of credit are quite fluctuating, and the monthly payments are levied on the outstanding amount. Therefore, the monthly repayment of the loan keeps fluctuating every time.There are certain home equity lines of credit where you are suppose to pay only the outstanding interest every month.At the end of the loan term, refinancing or repayment of the home equity line of credit is expected. Some home equity lines of credit offer the borrower the chance to refinance the outstanding portion to a fixed rate loan. Others may call for immediate repayment. This can be a problem for a borrower who is unable to obtain finance. At this point, the home could be at risk for foreclosure.Home equity line of credit proves to be the appropriate alternative for those who have built equity on their home. The borrower of a home equity line of credit gets the advantage of having a tax deductible loan, and the provision to pay for anything through it.
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