Home Equity Loans
Sometimes referred to as a HELOC (Home Equity Line of Credit) a home equity loan is a second mortgage on your home. The loan allows you to tap into your home's
accumulated equity, which is the difference between the amount your home could be sold for, and the amount that you still owe on your existing (first) mortgage.
Homeowners can use a home-equity loan for any purpose including home improvements, to pay for a new car, or to finance their child's college education.
Advantages
- Interest on a loan secured by the equity in your home is usually tax-deductible
- May replace or serve as an alternative to consumer loans, which usually carry higher interest rates and are not tax-deductible
Disadvantages
- Home Equity Lines of Credit and second mortgage loans typically charge a higher rate of interest than first mortgage loans