HELOC BasicsThere are many types of home equity loans available to homeowners. Cash out refinance is popular where you can refinance your mortgage and get a lump sum of cash. However, you are committing your equity all at once with home equity loans, in return for a potential lifetime repayment! Another option is a home equity line of credit?

This is a rolling credit agreement where you use the credit when you need it, rather than take it immediately in a lump sum and then ask yourself “What next?”

Home Equity Line of Credit

With rolling credit offered by a home equity line of credit you can use your credit whenever you like. You pay no interest until you actually use it. With regular cash out refinance deals or home equity loans, you are paying interest immediately. Even if you don’t spend a cent for two months you will still be paying two months interest – not so with a home equity line of credit!

If you spot something you would like to buy, and then buy it using your line of credit. That is when you start to pay interest – when you actually spend the money, not when you are allocated it.  So how would you use an equity line of credit? Here are some examples to show you how works.

Home Equity Loans

Some lenders will issue you with a debit card.  When you visit a restaurant, you can pay with the card. When you want to purchase items from a store – likewise.  Fundamentally, whenever you want to spend money, you use the card or checks that may be provided and your expenditure is charged to the line of credit.

You are charged interest on what you spend, and once you have spent the total credit associated with it you must continue with your repayment- just as with a credit card. Whether you take a home equity loan such as this, or seek another means of making use of the cash you have tied up in your equity, is immaterial.

The point is that finance such as home equity loans is available, and a home equity line of credit has earned through the equity you have established on your home. There is no reason why you should not use that equity as you believe you should.