Equity Lines

Using a credit line to borrow against the equity in a home has become a popular source of consumer credit, because  can borrow up to 85% of the appraised value of their home — minus the amount they still owe on their first mortgage.

Most of these loans come with variable interest rates, some come with attractive low introductory rates, and a few come with fixed rates. Most have large one-time upfront fees, others have closing costs, and some have continuing costs, such as annual fees. You can find loans with large final (balloon) payments at the end of the loan, and others with no balloons, but with higher monthly payments.

Home equity lines of credit require you to use your home as collateral for the loan. This may put your home at risk if you are late or cannot make your monthly payments. Those loans with a large balloon payment may lead you to borrow more money to pay off this debt, or they may put your home in jeopardy if you cannot qualify for refinancing. 

Be sure to review the home equity contract carefully before you sign it. Do not hesitate to ask questions about the terms and conditions of your financing. No one loan is right for every homeowner.