When a homeowner sells their home to a family member at a price well below the market value, it is sometimes considered a gift of equity.
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A Home Equity Line of Credit, also known as a HELOC, allows you to use the value you’ve built up in your home in order to secure a revolving line of credit. Individuals and families often use a HELOC to pay for serious expenses (like healthcare or college tuition) or to consolidate high-interest loans (like credit card debt).
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Home equity loans, which are sometimes known as second mortgages, allow homeowners to take out a loan against the equity in their home. Home equity loans are divided into two types. The first is a home equity loan, which is a traditional, fixed rate loan. The other is a home equity line of credit (HELOC). Since one of our other FAQs addresses the details about HELOCs, in this one, we’ll stick to talking about regular home equity loans.
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Home equity loans (HELs) and home equity lines of credit (HELOCs) are both ways that you can use the value in your home to pay bills, medical expenses, or to finance home improvements and renovations. While home equity loans provide a large, lump-sum payment usually in the form of a check, a HELOC simply provides access to credit based on the equity in your home. As a revolving line of credit, a HELOC functions more closely to a credit card than a traditional mortgage -- and many HELOCs actually come with one.
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When you’re considering your first refinance mortgage, you’re full of questions. How much will this cost me? Is it really the right move? What even happens to my equity during this transaction? The good news is that it probably won’t cost as much as you think, but the equity in your home is affected by the type of refinance mortgage you choose.
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The interest on both HELs and HELOCs are lower than credit card rates as they are secured by your home, which makes them an attractive source of funds. The main differences between the home equity loans and home equity lines of credit are:
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A home equity loan is a second mortgage. It uses the equity in your home as security for a loan. The low-interest rate and substantial loan amount make it an attractive source of funding for various needs. To qualify for a home equity loan generally requires you to have the following:
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