Home, undoubtedly, is the most prized possession of any individual. It is also one of the most vital but expensive investments. No matter which part of the world you might reside in, purchasing a home is one of the most daunting tasks. One should think twice before using it as a collateral to get a home equity line of credit. Experts hold the view, and rightly so, that home equity line of credit is one option that should only be used in such extreme conditions like settling the medical or education bills or attending some other urgent home requirements.

Home equity line of credit is very similar to credit cards. Here also you have a credit limit and it is entirely up to you as to when you want to use that amount. This is one major differentiating factor between home equity line of credit and other mortgages.

Another important aspect of home equity line of credit is the fact that the borrower does not get the entire amount upfront. Rather funds can be drawn anytime within the specific period. The interest rate levied on home equity line of credit also varies. This change is dependent on such market indices like prime index.

While repaying home equity line of credit one can opt to pay only the minimum amount required. This includes a portion of the principal as well as interest. However, paying minimum amount would mean that probably the payments made are not enough to cover the entire principal. This would make the borrower obliged to pay a considerable amount at the end of the term.

If the borrower fails to keep his end of the bargain on both the above mentioned situations then he runs the risk of foreclosure. It is because of this fact that it is advised that one opts to pay an amount that is more than the minimum required amount. This would ensure that one regularly pays off a portion of the principal so that he needs to pay a lesser amount to cover the principal at the end of the term.

In the end it can be concluded that it is the flexibility in terms of borrowing and repayment that makes home equity line of credit such an attractive financial option. The interest paid here tax deductible in certain cases which make it even more useful. Another important aspect of home equity line of credit is the fact that the borrower does not get the entire amount upfront. Rather funds can be drawn anytime within the specific period. The interest rate levied on home equity line of credit also varies. This change is dependent on such market indices like prime index.

While repaying home equity line of credit one can opt to pay only the minimum amount required. This includes a portion of the principal as well as interest. However, paying minimum amount would mean that probably the payments made are not enough to cover the entire principal. This would make the borrower obliged to pay a considerable amount at the end of the term.

Check out www.amortgages.ca for information on different refinancing options.

Author Bio: Please visit the website Amortgages.ca if you are interested to learn more about home equity line of credit. The site also provides valuable information about mortgage Maple and mortgage Markham.

Category: Finances
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