What is Home Equity Loan?

Home equity loan is a fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax -deductible. Often used for home improvement or freeing of equity for investment in other real estate or investment. Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.

Home Equity Loan Tips
The disclosed APR will not reflect the closing costs and other fees and charges, so compare these costs, as well as the APRs, among lenders.

Because the cost of borrowing is tied directly to the index rate, find out what index and margin each lender uses, how often the index changes, and how high it has risen in the past.

Consider a traditional second mortgage loan instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home.

Do not simply compare the APR for a traditional mortgage loan with the APR for a home equity line because the APRs are figured differently. For a traditional mortgage the APR takes into account the interest rate charged plus points and other finance charges. The APR for a home equity line, on the other hand, is based on the periodic interest rate alone and does not include points or other charges.