Home equity lending is making a vigorous comeback into the lexicons of home owners and investors across the landscape of America. Home equity loans are a form of loans in which the homeowners borrow money by leveraging the equity in the house. The reason for the home equity loans rise is due to the low interest rate in the market since they were in 2008. Interest you pay is usually tax-deductible for those who itemize deductions, the same as regular mortgage interest. Federal tax law allows you to deduct mortgage interest on up to $100,000 in home equity debt ($50,000 apiece for married persons filing separately).
Home equity loans comes in two options- Fixed rate and lines of credit and both are fixed up to the terms of 5 years to 15 years. One other point to be noted is that before the borrower house is up for sale, the loans must be cleared up.
Fixed Rate loan provides the borrower a lump sum of money at one go which is scheduled to be repaid over a fixed term of time. The payment and the interests remain fixed and there is no change in the payment structure. This loan is quite adept for the borrowers who are seeking money at one go for one large investment.
Line of credit or Home equity line of credit (HELOC) Loan is often preferred by borrowers who seek loan to cover their expenses over a period of time. Borrowers are pre-approved for a certain spending amount and can withdraw money using the card or special checks. Monthly payment will be charged on the spending plus the interests accrued on it and HELOC has a fixed term. When the end of term comes to an end, the full due outstanding amount must be repaid in full.
Interest Rates have dipped
Consolidation of debts
Interest paid on a home-equity loan is also tax deductible
Use the loan to do home renovation to increase value of home
Use the Cash for purchases