An equity line of credit is the amount of money that a lending institution is willing to loan you against the equity in your home. This is figured by taking a certain percentage of the difference between the appraised value of the home and what is owed on the the first mortgage.
Features
If the line of credit is set at $50,000, you will be able to borrow up to that amount at any time over the life of the credit line. If you pay the amount borrowed down, you will usually be able to make draws on the available amount, back up to your line of credit.
Types
Equity lines of credit come in various forms. Most let you draw on the account by writing checks against the account. Others let you use a charge card to take money out of the account.
Considerations
Make sure the equity line of credit is suitable to your needs. You can choose from lines that have variable or fixed interest rates, some that have no minimum withdrawal, and equity lines of credit that require minimum withdrawals.
Effects
With an amount available on an equity line of credit, major purchases or repairs become a great deal easier to make, as you do not have to call your lender each time you need the money.
Warning
Be aware of the payback terms at the end of the life of the equity line. Some equity lines of credit may be renewed, others you can no longer borrow from, but have a certain number of years in a payback period. Others may require payment in full at the end of the loan.
