Equity for an individual or a business is defined as the total assets minus the total liabilities. For instance, when a borrower has a loan against property, the equity of the borrower is determined by the amount he or she has already paid. The current value of the property is estimated, and the amount owed as loan is subtracted from the value. This amount is considered the equity of the borrower. A line of credit is defined as the maximum amount of money that a person can borrow from a financial institution without requiring any additional approval. The lender determines it on the basis of two major factors namely the credibility or credit worthiness of the borrower and earning power. Quite often, these calculations are quite complicated and both borrowers and lenders turn to equity line of credit calculators.Equity line of credit calculators help borrowers find out the extent of credit they can obtain from their lenders. To calculate this, the borrower has to find out the maximum, combined loan-to-value (CLTV) ratio. The loan to value ratio is calculated as the percentage of the property’s appraised value that the lender will lend the borrower. The loan, in this case, is the sum of the proposed credit line, plus the balance of any outstanding mortgage debt. Value is defined as the current market value of the property, which is generally assessed by an independent appraiser.Equity line of credit calculators also allow the borrower to assess whether debts need to be consolidated. Consolidation of debts means combining all existing debts into one loan. This may help the borrower gain a more favorable interest rate. Borrowers typically enter the number of months needed for repayment and the calculator displays the monthly payment, savings in interest expense, any tax-related savings and the total cost savings.An equity line of credit calculator helps a borrower decide a cheaper financing source for an auto loan or a home equity loan.
Many people dream of renovating and upgrading their homes. They are held back because of rising costs of amenities and high interest rates of the mortgage loans. Homeowners can certainly take advantage of their home with a HELOC or home equity line of credit.Many borrowers have queries regarding a HELOC. The most common question is on the meaning of HELOC, and what sets it apart from a home equity loan. Customers need to be informed that HELOC is the acronym of a Home Equity Line of Credit. It offers a mortgage loan with the option of taking it wholly or a part thereof. This is not the case in a home equity loan.Customers are also interested in knowing the advantages of HELOC over other loans. The interest rate is normally lower than the interest rate paid on credit cards and other kinds of non-secured debts. The interest rates on credit cards and personal loans are generally non-tax deductible, but the interest paid on HELOC is tax deductible.This loan can be used for debt consolidation to pay off high interest credit card debts, home renovation and improvements, purchasing and refinancing a home, to pay off educational expenses and university and college tuition fees. Another important query is about the qualification criteria and calculation of the amount of credit. Usually the credit history of a person is evaluated, along with relevant information on employment, income, type of property and existing mortgage or other loans. The amount of loan is calculated on the value of the home and the applicable credit limits.People are also concerned about additional hidden costs that might burden the repayment period. Generally most banks and lenders do not charge any additional expenses, except an annual fee for their services to the borrower.
A home equity line of credit is a combination of a line of credit and an equity loan. It is also referred to as HELOC. It gives the maximum loan amount based on credit and equity, with the difference between total assets and total liabilities. This permits the borrower to take a maximum loan amount, provided it does not exceed the credit limit, without re-applying each time.There are different equity line of credit rates, like home equity line of credit, commercial equity line of credit and best home equity line of credit. In HELOC, homebuyers can use some of the equity that is built up in the home and can be used personally. This facility is available for homebuyers, but not for tenants. Many reputed banks offer HELOC to borrowers.A home equity line of credit is given to the homeowner by check or a credit or debit card, which can be used by the borrower according need. Interest is paid on the amount that is used. The options depend on the policies of the different banks and the requirements of the homeowners.The different terms, conditions, fine print and rates of different loans are based on and vary according to customer requirement. Borrowers can make a smart choice by conducting research on all essential information including the prevalent rates. If customers have trouble spots on their credit reports, it is essential to fix the errors before approaching various loan lenders.Customers should also study all the available options and compare the different loan terms from various banks and organizations. Sometimes borrowers avail of a lower rate by negotiating with the bank loan officer, as they are very keen on retaining customers.
An equity line of credit, abbreviated as ELOC, is defined as the combination of a line of credit and an equity loan. This type of credit allows the user to fulfill his or her dreams however he deems fit. To be more precise, it establishes a maximum loan amount based on credit and equity. The term equity refers to the difference between total assets and total liabilities. This loan permits the borrower to take as much money needed without re-applying each time. The only requirement is that the total amount of borrowed funds should not exceed the credit limit. Borrowing is an easy process like writing a check and the borrower gets the money when it is needed.Money is borrowed in a lump sum, and it is paid back over a period of years with interest. The interest rate varies from one to another. Compared with other types of consumer loans, the interest rate is relatively low for ELOC and is tied to prime rate. It is a smarter way to borrow than any other methods of borrowing.Home Equity Line of Credit, Commercial Equity Line of Credit, and Best Home Equity Line of Credit are some of the different ELOC lenders. An Equity Line of Credit loan is a perfect choice for anyone whose home is not mortgaged. There are also World loan customers who can obtain an equity line of credit over 30-years and convert the equity in their home to cash. Equity Credit Lines are available in most states.
Home equity line of credit rates are the rates of interest charged to a borrower on the amount borrowed. It is also known as the ‘annual percentage rate’ or APR. The APRs of a financial institution’s home equity lines of credit depend on a factor known as ‘prime.’ Prime is the rate published in the Wall Street Journal on the first day of publication after the 10th of each calendar month.The margin of ‘prime’ varies and depends on the approved credit line amount and combined loan-to-value (CLTV) ratio. CLTV ratio is the percent of a property’s appraised value that the lender will allow as a loan. The loan is calculated as the sum of the proposed credit line and the balance of any outstanding mortgage debt amount combined together. Value is estimated as the current market value of the property.Insurance on a property that is to be secured is necessary. Flood or fire insurance, may also be required. Generally, any additional fees or conditions imposed by the city, state or county where the subject property is located are the borrower’s responsibility. The APRs are subject to change without notice.Many financial institutions provide certain rate discounts to new home equity customers. They may specify a certain minimum amount to be drawn for a certain period of time as the criteria. Existing customers are generally required to clear their current balance. These conditions may vary depending on the lending organization’s policies.There are many organizations that offer competitive rates for home loans. Their respective web sites carry all the relevant information pertaining to home equity line of credit rates. They also have credit calculators that display the amount approved and monthly payments by considering the current APRs and Prime.There are several fees that are applicable apart from the standard rates quoted by the company. A borrower must select a lender who offers competitive rates and does not have too many assorted and hidden charges.
Many people invest in real estate by making a full upfront payment, but are not financially sound enough to renovate or refurbish it. These people can avail of a personal loan against their property with a home equity line of credit or HELOC. A HELOC offers a higher loan amount than other similar loans based on the credit limit of the borrower.A HELOC allows a borrower to explore the extent of credit obtainable from lenders. Repayments have to be made every month, along with the interest that could be tax- deductible. There are limitations on the deductions on the personal tax returns for the interest paid on HELOC. Only that part of the interest on debt can be deducted, which cannot exceed the value of the collateral on a home and has to be less than $100,000.If the borrower makes the real estate investment as a corporate entity, then deductions in the form of the business interest expenses can be expensed. This transaction needs to be reflected on personal returns. It must be documented in writing and should be within the limits of normal business transactions. Customers need to consult their tax consultants and advisors on the legality involved in order to save on tax.Financial consultants will give advice on planned tax-breaks regarding HELOC. The interest deduction is not a dollar-for-dollar reduction of the taxes. It is only a percentage. The deductions may not be as valuable due to the declining tax rates. If the adjusted overall income is high enough, the phase-out for itemized deductions may prevent the borrower from taking a full deduction. Advisors warn against choosing a HELOC simply for the benefit of tax deduction, as many other deals also provide similar tax advantages.
Commercial Equity Line of Credit, abbreviated as CELOC, is best suited to meet the industry’s changing financial needs. It is mainly used by small businesses, especially start-ups. A Commercial Equity Line of Credit requires a zero balance for a specific time annually. CELOC provides easy access to money when the borrower needs it. Using checks provided, the money can be easily accessed.A Commercial Equity Line of Credit allows the mortgager to borrow money on a regular basis to finance transactions and for business purposes. The amount borrowed depends on the company’s collateral and cash flow needs. In this method of borrowing, the borrower mortgages company assets, rather than personal assets, as collateral. Even though it is harder to obtain, it provides greater borrowing power.With the help of a Commercial Equity Line of Credit, the borrower can regulate cash flow by borrowing only what is needed. It reduces interest expenses often incurred by over borrowing. The interest rate equals or exceeds the prime rate.A Commercial Equity Line of Credit provides almost all the benefits that are available with a Home Equity Line of Credit. The line of credit can be used to improve cash flow or expanding business. Also, it is used for other expenses such as purchasing equipment and increasing inventory. A major advantage of CELOC is that the borrower has to pay the interest only on the amount accessed.Also known as Operating loans, a Commercial Equity Line of Credit plays a vital role in the business field. By providing quick access to cash with the option to pay overtime, CELOC ensures flexibility to the borrower.
A home equity line of credit is similar to a second mortgage. The difference between a home equity loan and a home equity line of credit or HELOC is mainly the way the loan is given. Homeowners cash in on their home and finance their dreams with the help of a HELOC at low interests rates.HELOC has its pros and cons. Most of these loans have very little or no closing costs. This results in lower monthly payments compared to fixed interest rate loans. The variable mortgage interest rates are usually much lower than the standard fixed interest rates loans. Customers pay the interest only on the money used and not on the entire loan amount. The remaining unused balance of the equity line can be used as an emergency fund. These are some of the pros of HELOC a borrower can enjoy.On the flip side, HELOC have a lot of disadvantages. The interest rates are not fixed and they may fluctuate. Most lenders charge borrowers a yearly fee for their services. Many lenders exploit the borrower, especially senior citizens, minorities and people with bad credit. They are more susceptible to the lender?s abusive and exploitative strategies. Customers need to do a lot of research before selecting a particular lender.It is also essential for customers to submit all valid documents to the lender for verification and authentication. They should check whether they have enough income proof to make the repayments in time. All the terms and conditions have to be read carefully to identify the fine print of the loan agreement. Many borrowers end up signing agreements with many hidden clauses and charges.