HELOC vs. Conventional Loan

HELOC’s differ from a conventional loans in that the interest rate on a home equity line of credit is variable depending on an index (Prime Rate for example). In plain terms, this means your interest rate will most likely change over time!

What makes a Home Equity Line of Credit so popular is that interest paid is usually deductible under federal and most state income tax laws; this makes that cost of borrowing money not as high!

Sounds easy, so why doesn’t everyone do it? Most people are doing HELOC’s and most can’t afford it! These people are considered to be Upside Down – a term used to describe someone who owes more on their home than it’s worth (much like a car

Here is the catch! You owe $80,000 on your home loan and your house is worth $90,000 on the open market. You decide to apply for home equity Line of Credit and the banker asks you what you would like the loan for – That’s right! Most of the time, you can ask for more than your home is worth, say $110,000 and almost always, you’ll get the loan.

$30,000 to Invest

Now you have $30,000 and live the life for awhile, perhaps a new boat, car or vacation. Then comes the day you need to sell your home but it’s only worth $90,000 and you need $110,000 plus the realtor fee of $7,700 (7%), so you put the house on the market for $117,700 and it never sells, payments become late and worse case scenario, you have a foreclosure on your hands.

Here on home equity line of credit you will find all solutions and ideas for start a profitable business or to refinance your credit or a loan.