Equity Line of Credit

Equity line of credit is a revolving credit that usually uses your real estate property as collateral. Many lenders now is asking borrowers their home as collateral because this is the only largest asset that a typical borrower has. Many borrowers use their credit lines for major expenses only such as college education, home improvement, and medical bills. With home line of credit, lenders tend to take 75% of your house value and subtracting the balance that you owe on your previous mortgage. The remaining amount will be your line of credit.

In most cases of home equity line of credit, you will have a minimum monthly payment requirement depending on how much you want it to pay and when you want it to pay but at the end of a given time, you’ll going to pay the amount you borrow in lump-sum according to amortization payment schedule. This method is also being applied on credit cards owner. That is how equity line credit differs from conventional loan or credit.

Another difference is that the interest rate of equity line credit changes from time to time. Borrowers should be aware that lenders don not calculate the margins in the same way. Most borrowers do not know about this and lenders will not initiate telling you about this. But they are willing to do so if a client asks.

It must be always kept in mind that the collateral in equity line of credit is the borrower’s house. It means failure to pay the loan or meet the loan requirements will result to foreclosure.