Home Equity Credit Line
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Equity Credit Line at Premier Equity
Home-Equity-Loans.org
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.
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Equity Credit Line at Premier Equity
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