Summer is here and it's time to take care of those home improvements you been avoiding. One way to finance these projects is with a Home Equity Loan. Corey Blake from New Horizons Credit Union joined us on Studio10 with the details.
Here is a list of some of the questions and answers talked about during the segment.
What is a Home Equity Loan?
A Home Equity Loan is a type of loan in which the borrower uses the equity in their home as collateral. This creates a lien against the borrower's house and reduces the actual equity in the home.
There are two types of Home Equity Loans, can you explain the difference?
There are two types Home Equity loans - Closed End, which is referred to as a Fixed Home Equity and an Open End, commonly referred to as a Home Equity Line of Credit (or HELOC). Both are second mortgages because they are secured against the value of the property, just like a traditional mortgage. A HELOC is a line of revolving credit with an adjustable interest rate, which allows the borrower to choose when and how often to borrow against the equity in their property. Whereas, a Home Equity is a one-time lump sum loan, often with a fixed interest rate.
Can those loans only be used for the home?
No, they are usually acquired for home repairs or improvements, but often times they are used to consolidate bills, pay for college, buy a boat, etc.
Are there any other advantages of a Home Equity Loan?
Yes, the interest rate you will pay on the average Home Equity Loan is generally lower than the interest rate you will pay on the average credit card or any other type of non-secured credit. For Home Equity Loans, you can generally deduct the interest you pay as long as it is your primary residence, but make sure to consult your tax advisor.
New Horizons Credit Union
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