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Home Equity Credit Line

Tap into a Home Equity Credit Line at Premier Equity


When you put your home down as collateral for a loan you are said to be using a home equity line.  This type of credit is revolving and is mainly used for large expenses rather than everyday and ordinary expenses.  Due to a homes larger value than most other collateral, home equity loans usually have a high credit limit and should be used for greatly needed expenses.  Your credit limit is the most that you can borrow at one time.  It is precisely determined during the loan approval process.

A standard formula to determine the credit limit on home equity loans is used by many lenders.  They pick a percentage ( 75 % is common) and take it from the home's appraisal amount.  Any balances on the current mortgage are then subtracted from this amount, with the resulting sum being your potential credit line.  For instance: 

  Home Appraisal Amount $100,000
  Percentage Taken From Home x75%
  Amount of Percentage $75,000
  Subtract Mortgage Balances -$40,000
  Calculated Potential Credit Line $35,000

There are other factors used in calculating your credit limit, such as credit history, current indebtedness, and yearly wages and salary.

Home equity loans are contracted with specific dates by which the loan must be paid back in full.  For example, you may have 15 years from the day you received your loan to pay it back month by month.  After the time has elapsed, depending on which loan options you choose, you may reinstate the credit amount again if you like.  (Some loan plans will not allow you to do this).  If you have a remaining balance when your time period is up, you may be required to pay it back in full.  Again, depending on the loan options you choose, you may be allowed to pay back the remaining balance over another fixed period of time. 

After your home equity loan approval is completed, you should be granted immediate access to your entire credit line.  Normally, your loan will be fluid so that you can withdraw money from it whenever you like.  This process is made even easier by supplying you with unique loan checks at your disposal and or specialized credit cards to withdraw money and make transactions.

Yet, there will most likely be restrictions and rules on how you manage your credit line.  Depending on the lender, some home equity loans might necessitate you to draw an initial sum as soon as your credit line goes into effect, whereas other plans might demand that you must borrow a minimum amount each time you draw from your loan. 

The above information was obtained from various sources published by the Federal Reserve Board and Office of Thrift Supervision.

Tap into a Home Equity Credit Line at Premier Equity


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