re-financing-with-a-line-of-credit-loan

www.dotcomhunter.com Re-Financing with a Line of Credit Loan Some homeowners might consider re-financing with a home equity line o f credit as opposed to a traditional loan. There are definite advanta ges and disadvantages to these types of situations. The key to unders tanding whether or not re-financing with a home equity line of credit is worthwhile involves understanding what a home equity line of cred it is, how it differs from a home loan and how it can be used. This a rticle will briefly cover each of these topics to give the homeowner some useful information which may help them decide whether or not a h ome equity line of credit is ideal in their re-financing situation. What is a Home Equity Line of Credit? A home equity line of credit, sometimes called a HELOC, is essential ly a loan in which funds are made available to the homeowner based o n the existing equity in the home. However, in this case, it is not really a loan but rather a line of credit. This means a certain amou nt of money is made available to the homeowner and the homeowner may draw on this line of credit as funds are needed. There is a specifi ed period in which the homeowner is able to make these withdrawals. This is known as the draw period. Additionally there is a repayment period in which the homeowner must repay all of the funds they withd rew from the account during the draw period. How Does a Home Equity Line of Credit Differ from a Home Equity L oan? The difference between a home equity line of credit and a home equi ty loan is really quite simple. While both loans are secured based on the existing equity in the home, the manner in which the funds a re disbursed to the homeowner is rather quite different. In a home equity loan the homeowner is given all of the funds immediately. Ho wever in a home equity line of credit the funds are made available to the homeowner but are not immediately disbursed. The homeowner i s able to draw against this line of credit as he sees fit. There ar e limits to the amount which can be withdrawn and there is also a l imit on when funds can be withdrawn. A home equity has a draw perio d and a repayment period. Funds can be withdrawn during the draw pe riod but must be repaid during the repayment period. How Can a Home Equity Line of Credit Be Used? One of the biggest advantages of a home equity line of credit is tha t the funds can be used for any purpose specified by the homeowner. While other loans such as an auto loan or even a traditional mortgag e might have strict restrictions on how the money lent to the homeow ner can be used, there are no such restrictions on a home equity lin e of credit. Common uses of a home equity line of credit include the A gift from www.dotcomhunter.comwww.dotcomhunter.com following: * Home renovations or improvement projects * Opening a small business * Taking a dream vacation * Pursuing higher educational goals * Opening a small business In some cases the interest paid on a home equity line of credit may be considered tax deductible. This may apply in situations where t he funds are used to make repairs or improvements to the home. Howe ver, these expenses are not always tax deductible and the homeowner should consult with a tax professional before making decisions reg arding which interest payments can be deducted. PPPPP Word count 572 A gift from www.dotcomhunter.com