Undersanding Home Equity

• Generally speaking, home equity is the difference between what your home is worth and what you owe on your mortgage. If your home is worth $200,000 and you owe $150,000 on your mortgage, you have about $50,000 in home equity.
  
  

Home Equity Loans

• A home equity loan, also called a second mortgage, is an installment loan for a specific amount of money to be repaid by a specific date. It will have a scheduled monthly payment. A second mortgage can be useful when you need a known amount of money on a one-time basis.
  
  

Home Equity Lines of Credit

• The difference between a home equity loan and a home equity line of credit (also called a HELOC) is that you can use it as you need it. You only pay interest on the amount that you use, not your entire line of credit. Payment requirements may be flexible on home equity lines of credit.
  
  

Using Home Equity Financing

• A popular reason for getting a home equity loan or line of credit is for consolidating credit card debt. This can work to your advantage if you can repay the home equity line quickly. Otherwise, extending repayment indefinitely can reduce or eliminate any potential savings.
  
  

Foreclosure

• Both home equity loans and home equity lines of credit are mortgage loans, which provide the lender with the ability to foreclose if you don't make payments.