NEW Article by Home Equity Loans site titled Home Equity and What It Really Is

Before getting a home equity loan, it is vital for you to know the basics about what home equity is and why people avail of it. Basically, home equity is the value of your home and the money that you have paid for that value. This means that your home equity is the difference between the appraised market value of your house and  the amount of money that you still owe on the mortgage of your house. This means, for example, if you still owe $25,000 on your mortgage and the appraised market value of your house is $75,000; then your home equity is $50,000.

Today, due to the demands of maintaining a home and a family, many people find themselves in debt even if they own their own homes. This is why home equity loans exist for families that can put their home equity up for collateral. Another way to view a home equity loan is as a second mortgage on your house. By borrowing against their home equity, many families are given the opportunity to provide for costs in tuition, health, and other things like home improvement and the purchasing of more property to add to family assets.

There are two ways that families can avail of home equity loans. One way is to apply and qualify for a home equity loan and receive the money in bulk. The advantage of this is that usually the home equity loan rate is fixed and you will be able to enjoy a manageable repayment scheme. However, the disadvantage is that even though you may only need a small amount to loan, you will be given the entire amount of your home equity. This means that you will end up paying the interest rate based on the entire chunk of the principal loan.

Another way to avail of a home equity loan is to apply for a home equity line of credit. With home equity lines of credit, a borrower is given a credit line (similar to a credit card) wherein he is able to withdraw money as the need arises. The best part about a home equity line is that you can just withdraw money as you need it, meaning you don’t have to get the whole amount put against your home equity. One disadvantage, however, is that there is a minimum amount that you will have to withdraw every time you feel the need to. These withdrawals also come with corresponding fees every time they are done.

The most important thing for families to remember is that their home equity loans or home equity lines of credit are all secured by the homes that they own. This basically means that if they do not follow the proper repayment terms, they risk losing their homes altogether to the bank or the lender. It is always vital that borrowers keep in mind that they need to be prudent when spending the money they loan on assets that increase in value rather than those that decrease in value.