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Have you ever thought of your home as a goldmine? You surely can take advantage of your home’s value by borrowing against it with a home equity loan or line of credit.
What’s equity?
When you make a down payment on your home, the amount determines your equity, or the percentage of the property you actually own. The more you put down, the greater your equity. For example, if you buy your house for $375,000 and you put $150,000 down and have a $225,000 mortgage, your equity is 40%. But your equity isn’t fixed, and it can increase
or decrease in a couple of different ways. As you pay off the principal on your mortgage, your equity in your home goes up. So when your mortgage is fully paid off — Congratulations! — your equity is 100%. But the amount you’ve paid off of your mortgage isn’t the only thing that affects your equity. While you’re paying off your mortgage, your equity may change as the value of your home changes. For example, if the house you bought for $375,000 is reappraised at $450,000, your equity with the same mortgage increases to $225,000, or 50% — a 10% increase even though you haven’t paid off any more of the loan. Keep in mind that the value of your home can go up or down based on the market condition.
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Home equity loans
If you ever need to borrow a substantial amount of money — say you need to pay for a child’s college tuition or finance major home renovations — the equity you’ve built in your home can come in handy. That’s because your equity can serve as collateral in a home equity loan, which typically allows you to borrow more money at a lower rate with better terms than other types of loans.
Home equity lines of credit
Home equity lines are another great way to make use of the equity in your home when you need to borrow money. An equity line differs from a loan in that it’s a revolving credit arrangement, which you can use in much the same way you would use a credit card.
Remember, though, like home equity loans, home equity lines of credit put your home at risk. So try not to default by falling behind in your payments. Especially since by making your payments on time you’ll be following your savings strategy, which will make you richer.
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Orange you glad you’re saving with ING DIRECT?
It’s a line of credit. It’s a loan. It’s both. With an Orange Home Equity Loan, you get to decide. With our rate lock option, you get the flexibility of a line of credit along with the security of a loan.
Use our Solutions Finder to see how much you can borrow now!
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