Expert Systems and Decision Support By William H Shorter III What is Home Equity The market value of a homeowners unencumbered interest in their real property or the difference between the homes fair market value and the outstanding balance of all liens on the property ID: 622741
Download Presentation The PPT/PDF document "Home Equity Loans vs. Home Equity Line o..." is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Home Equity Loans vs. Home Equity Line of Credit
Expert Systems and Decision Support
By: William H Shorter IIISlide2
What is Home Equity?
The market value of a homeowner’s unencumbered interest in their real property – or the difference between the home’s fair market value and the outstanding balance of all liens on the property.
Your home’s appraised value – what you owe Slide3
Calculating Loan Offer / Credit Limit
Every bank or lender will vary on the amount that they are willing to give
Bank of America offers up to 85% of the value of your home minus what you still owe on the home
Lenders will often look at your credit score and history, employment history, monthly income and monthly debts which can affect the amount they are willing to giveSlide4
Home Equity Loan
Fixed Interest Rate
Typically has a higher interest rate than a HELOC
Borrow the full amount all at one
time
Good option for households with strict monthly budgets
Essentially a second mortgageSlide5
Home Equity Loan Cont.
Repay both principle and interest monthly
Interest is usually tax deductible for loan amounts up to $100,000
Cannot borrow additional funds
Plans for repayment are offered typically anywhere from 5 to 30 years
Banks will charge various fees for the application and set up of the loanSlide6
HELOC
A home equity line of credit is often referred to as a HELOC
Variable interest rate (usually lower than home equity loan)
It may be possible to fix the interest rate after money is withdrawn
Works like a credit card
Good for pay-as-you-go situationsSlide7
HELOC Cont.
Use a HELOC if the amount you need is unclear
Three major considerations when dealing with HELOCS are:
The interest rate could rise, increasing interest payments
The lender may offer a fixed rate for portions of what has been taken out
Most HELOCS provide interest only payment options during the draw periodSlide8
HELOC Cont.
The draw period is the period in which you can take money out of your account (usually lasts 10 years)
Once the draw period is over, the repayment period begins which usually lasts for a period of 15 years.Slide9
Which is better?
The choice between a Home Equity Loan and a Home Equity Line of credit is rarely black and white.
Most would suggest that If you have a set dollar figure for how much you need, to go with the Home Equity Loan since it’s a lower risk.