Home Equity Loans in Illinois
Need Cash? Maybe a Home Equity Loan or HELOC Can Help
For many years, people use the equity in their homes as a source of ready cash to pay for all sorts of expenses. While many of those loans became more difficult to get as home equity dried up as real estate prices dropped, if you have equity in your home and a good credit rating, it’s still possible to get a home equity loan or line of credit.
Loans against the equity in your home have many uses. Some people use them to renovate their kitchen or bath or for some other home repair. Others use them to buy a car, educate their children or even travel. Regardless of why you need the money, here are some things you should know about this still popular form of credit.
Illinois Home Equity Loans
When you take out a home equity loan, you put your home up as collateral. To get a home equity loan, you first need to have equity in your home. Some banks will lend up to 85% of the appraised value of your home, minus any current mortgage. So if you have a home worth $200,000 with a current mortgage of $90,000, the maximum amount you could borrow would be $80,000 ($200,000 x 85% = $170,000 - $90,000 = $80,000).
Home equity loans in Illinois also require excellent credit. While limits vary from bank to bank, it’s safe to say that you will probably need a higher credit rating that you may have needed to qualify for your original mortgage.
Home equity loans have one important difference with home equity lines of credit. The latter is a revolving line of credit with a variable interest rate. A home equity loan is a one-time withdrawal with a fixed rate of interest. While most people repay home equity loans over a 5 or 10 year period, longer repayment terms are possible.
Illinois Home Equity Line of Credit (HELOC)
With a home equity line of credit (HELOC), the lender agrees to lend you’re a maximum amount of money over a particular period of time. As with a home equity loan, you use your home as collateral. With a HELOC, the lender doesn’t usually give you the entire amount of money at once. Rather, you withdraw money as you need it to pay expenses.
Repayment of a HELOC is usually flexible. Most loans require payment of at least interest on a monthly basis. The interest rate is usually variable and based on an established index, such as the prime rate. In addition to interest, these loans allow you to pay as much principal as you wish.
Which is Better for You?
Most borrowers elect a home equity loan when they need a specific amount of money for a particular purpose, such as $20,000 to renovate their kitchen of $15,000 to buy a new car. HELOCs are most common when your need for cash varies or extends over a period of time, such as to make college tuition payments over a four-year period.
Whichever option you choose, home equity loans or HELOCs are popular for two reasons.
1. The relatively low interest rate compared to credit cards or other borrowing options.
2. The interest you pay is generally tax deductible on your federal return and may be deductible on your state return as well. (Check with your own tax advisor to be sure.)
Interested in an Illinois Home Equity Loan? Contact United Home Loans for more information today!