Home Equity 101
Anyone who has experienced debt can attest to the fact that
it is a very stressful and frustrating circumstance. Most
people that are in debt become more in debt. When they pay
off old debt, they create more debt by not having enough for
current expenses. This scenario can have a whirlpool effect.
Once a person is sucked in, it seems like it is impossible
to ever get out of debt and maintain good credit. It is important
to know your options, and realize that permanent debt is not
A home equity loan is one of many ways to pay off debt, pay
for your children’s college and/or make some renovations
or expansions on your home. A home equity loan, also called
a second mortgage, is basically a loan in the amount of your
home payment thus far. More specifically, it is the market
value of your home minus the amount you still owe on your
mortgage. If you own a home that is $100,000 and you still
owe $30,000 on the mortgage, your home equity is $70,000.
This means that you officially and legally own $70,000 of
your home. You may live in your home and therefore own the
whole thing, but it can always be foreclosed and repossessed
if you do not pay off the entire mortgage along with taxes.
Home equity loans are loans given in cash upfront. You determine
an amount of the loan and you get it all at once. You then
have to pay it back in intervals until it is all paid back.
You will have an interest rate along with the loan, but it
is tax deductible like a mortgage interest.
Home equity credit lines are the same as home equity loans,
but instead of receiving cash upfront, you will use it like
a bank account, taking out money as you need it. Also, your
payments will vary instead of the fixed rates you are given
with an equity loan.
Whatever you borrow against your home equity (whatever you
take out for a home equity loan) reduces your home equity
that amount. So, if your home equity is $50,000 and you take
out a $10,000 home equity loan, your home equity will then
Usually with a home equity loan, you will need to provide
the same types of support documentation that you are required
to have when applying for a first mortgage. Chase Manhattan
Mortgage will help you through the entire equity process,
inform you what you need in order to apply, and how to determine
what kind of equity loan, if any, is appropriate for your
Some equity loans are short term, some long term. You will
need to think about the financial items for which you are
using it. If you will need all of the money immediately you
will need a home equity loan. If you can wait to have the
money, or you predict you may need more for other expenses
in the future, you will probably want to look into a home
equity credit line. Chase professionals can help you with
all of this and advise you on options that fit your needs.