Home equity loans are a way of using the money that you've invested in your mortgage by it. Essentially, a home equity loan is a 'second mortgage' - a loan secured by your property. If you don't make good on your payments, the lending company or bank can force the sale to recover their money.
There are two major types of home equity loans - home equity loans equity lines of credit, also called HELOCs. Most lenders that offer home equity loans offer both equity loan for $10,000 and a home equity line of credit for $10,000 are two completely they have a lot of similar features.
Home Equity Loan
If you apply for and are granted a home equity loan for $10,000 at 7% APR for 15 years, you will receive a check or a deposit to your bank account of $10,000. That is the full amount of the loan that you can on that particular application. Depending on the terms agreed upon, you may have one to several you have to begin repaying the loan. You'll pay a fixed amount every month until the of the loan and the interest charge is paid off. You'll know from the very start be repaying.
Home Equity Line of Credit
A home equity line of credit - a HELOC - is much more like a credit card. When you apply for and are granted a home equity line of establishes a 'line of credit' - which functions just the way that a 'credit limit' does card. You may receive special checks or a plastic card with which to access your line but you don't receive the full amount at one time.
In fact, you don't have to take any of it immediately. You can draw on the line of credit at any time, up to the full amount of the line of credit throughout the agreed-upon life of the loan. Suppose that you're doing some can use your home equity line of credit to pay for $2,000 worth of roofing tiles. you $8,000 in your line of credit. Three weeks later, you can use your line of for $4,500 worth of windows - and still have $3,500 left that you can borrow against.
