How Home Equity Credit Lines Can Prepare You for an Unexpected Crisis

Home equity credit lines could be considered a liquid home equity account for emergency funds. Nationwide Mortgage Loans offers competitive interest rates for bad credit home equity loans and credit lines. Borrower who have had credit problems in the past may now qualify for a sub-prime 2nd mortgage with the recent expanding guidelines that allow lower credit scores than previous home equity products allowed. Refinancing your debt will not only lower your monthly payments, but paying off revolving credit card debt may significantly increase your fico score as well.

The home equity line of credit (HELOC) is one of two types of home equity loans. Because your home is the collateral that secures the home, and the loan takes a second lien position against your home, the secured credit line is also known as a "second mortgage."

HELOC Rates Today

Home-equity credit lines allow you to borrow against the equity in your home on an as-needed basis. Your home equity is the difference between what your home is worth and how much you owe on it.

Home Equity Credit Lines offer
cash when you need it.

Most lenders let you borrow up to 80% of your home equity, but some may let you borrow up to 100%. Once you are approved for the loan you'll get a checkbook or ATM card that allows you to borrow that money instantly and you only pay interest when you access the funds. During the draw period, typically 5 to 10 years, you can make interest only payments or pay down as much of the principal as you want. At the end of the draw period, you'll generally make monthly principal and interest payments for the rest of the loan's term.

Some lines of credit charge an annual fee after the first year, but some lenders offer HELOC's with no annual fees. HELOCs are typically low closing cost loans, but sometimes closing costs are waived. Although the HELOC is a variable interest rate loan, many people enjoy the flexibility it offers.

Not only can a HELOC be used in case of an unexpected crisis, but it also can be used to fund home improvement projects, finance education, for purchasing a 2nd home, for debt consolidation and to take advantage of investment opportunities and other purposes. Even if you pay off your HELOC, it can still be a useful financial safety net. For example, if you have a HELOC, don't close the line of credit after you pay it off. This way, if your credit card rate spikes up you can always transfer the debt back into your home, says credit expert Gerri Detweiler, author of "The Ultimate Credit Handbook."


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