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Home Equity Credit

Michael C Walker

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Home equity credit is a method of borrowing money for the purpose of getting another loan or mortgage. A home equity is the difference of the market value of your property minus your outstanding mortgage balance. The method of borrowing money using your home is termed as home equity credit. Typically, this mortgage is being paid off over a number of years, often 15 or 30 years.

Home equity credit is considered as home equity loan as well, wherein one party will grant second party a money or loan. Second party will not reimburse the first party immediately, thereby, generating a debt, but dealing on an arrangement either to pay or return the said amount in a given time. Home equity credit or loans offer important tax savings due to the fact that the interest paid on an equity loan is tax deductible.

There are two types of home equity loan or credit. First type is what we know, the traditional loan or mortgage. In this loan, lenders lends out a lump sum amount of money that needs to be paid over a certain period that you agreed of. The second type is what we know as HELOC. Borrower will be provided by lender a credit card or checks that he/she will use to consume his/her line of credit. Interest for traditional credit will start accruing immediately after the lump sum was released, but for the HELOC, interest do not begin accruing until a purchase is made against the equity.

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