Open the Cash Vault Inside Your Home

Believe it or not, many people do not understand equity and the power it provides.

In its purest form, equity is money. With regard to real estate (specifically, your house or other investment property), equity is measured in terms of the value of the property minus what you owe. So, if your home is valued at $100,000, and you owe $40,000 on it, you have $60,000 in equity (actual money that is available to you, under particular circumstances).

Surprisingly, many people have this type of equity and do not take advantage of it. Some people are actually in dire financial straits and fail to realize their problems can be solved very easily, by taking the equity from their home. Remember, your home is a "vault," and the money inside that vault belongs to you. Best of all, you can use that money/ equity for anything you desire, from home improvement to travel expenses to spending money.

Exactly what is a home equity line of credit or HELOC? A home equity line of credit, which lenders and mortgage brokers refer to as a HELOC, is a different kind of home loan. An equity line has different rates and terms from a conventional first mortgage. In a standard home loan, or mortgage, your monthly payments cover both the principal loan and the interest you are charged.

Most mortgage payments include escrow, or taxes and insurance. An equity line of credit payment does not reduce your principal loan amount and does not include escrow. You are borrowing the equity in your house and paying the bank an interest premium on that loan. With a HELOC, you pay only the interest on the loan and, generally, you get the money for less time than you do a standard first mortgage.

The underwriting on these loans is very simple, and in most cases, the loans are very easy to get. At close, you either get one big check, which you can deposit into your savings or checking account or you can get a check book and treat your equity line of credit as another checking account. The payment on equity lines is very enticing. Paying interest only makes for a very low payment. It's important to remember, though, when paying interest only, you are not paying down the principal loan balance.

The Power of Interest-Only Payments So, let's suppose you take an equity line for $50,000 at 4.25% interest. This interest rate is based on the Prime rate, a floating rate that can change but does not fluctuate very often. When this article was first published, the prime rate was 4.25 percent. So, on your $50,000 equity line of credit, your payment is $177.00 each month. This is an incredibly low payment on a loan of this size. This gives you a great deal of power, because you can control a large sum of money for an extremely low monthly payment. It is this low, because you are only paying the interest on the loan.

At the end of the first year, you will have paid the bank over $2,100. You will, however, still owe $50,000. This is because your monthly payment is an interest-only payment. This is where some people can get in trouble with home equity lines of credit. If you use all the equity in your home and never pay down the balance, then decide to sell your house, you won't make anything on the sale, because you'll owe it all to the bank.

It is also important to understand the terms on a home equity line of credit (HELOC). When talking to mortgage professionals about home equity lines of credit, be sure you understand the terms, as lenders vary on what they'll offer. Like conventional mortgages, which have terms of 30 years, 15 years, 10 years, etc., home equity lines also have various terms, but not all lenders offer them. Don't let this confuse you. Just find your trustworthy mortgage broker, and tell him or her exactly what you want.

Unlike mortgage payments, which include complicated yearly amortization of the principal loan amount, interest-only payments are calculated very easily. You can do it in two simple steps. To find out your payment, first learn what rate of interest you'll be charged. If you are using 80 percent or less of the equity available and you have an A credit rating, you'll be able to get the best rate available, which is the prime rate.

Now, let's assume you have $40,000 in equity in your house, but you only need $20,000 (taking less than 100% of the equity is important). You take $20,000 and multiply it by 4.25%, which gives you 850. This is what you'll pay each year to borrow $20,000. Next, divide the 850 by 12 for a monthly, interest-only payment. Your payment for your $20,000 home equity line of credit is $70.83.

This is a very powerful loan. Imagine paying less than 71 dollars for the ability to control $20,000. Some people pay more for cable TV or their monthly cell phone bill. Some people even take the equity in their home and invest it elsewhere. You're probably figuring out how much equity you have right now, and what you can do with that money!

To learn how you can turn your equity into a never-ending money cycle that will fill your bank account year after year, read Winning the Mortgage Game. Whatever you decide, open the cash vault inside your home, and make use of your equity today.

Mark Barnes is author of the wealth-building system, Winning the Mortgage Game and other investment real estate books. He is also a suspense novelist, and his new novel, The League, will thrill both suspense and sports fans. Learn about Mark's wealth-building system and get his free home loan course at http://www.winningthemortgagegame.com. Learn more about The League and read an excerpt at http://www.sportsnovels.com

---

Alternatives to Filing Bankruptcy

Deciding to file for bankruptcy is a decision that should... Read More

Debt Consolidation Loan and Consolidation Loans

Debt consolidation loan services act as a third party intermediary... Read More

Debt Consolidation -- Choose Your Credit Counselor Carefully

Recently passed by Congress, the Bankruptcy Abuse Prevention and Consumer... Read More

Free Yourself Of Debt and Worry with Debt Consolidation

Debt consolidation programs can help you lift the burden of... Read More

Getting the Most Out of Consolidation Loans UK

Before letting too much debt or too many payments get... Read More

16.4% APR $5,000 Auto Loan...HELP!

Are you the victim of a high interest rate auto... Read More

Credit Counseling ? Congress Offers No Details in New Law

The recently passed Bankruptcy Abuse and Consumer Protection Act was... Read More

Credit Counseling ? Get in Line Now to Avoid the Upcoming Rush

Credit counseling is a valuable service for consumers who have... Read More

How Do I Know a Good Credit Card Debt Reduction Strategy When I See It?

Credit card debt reduction is an important part of the... Read More

What is the Difference Between Unsecured and Secured Debt?

A secured debt is a debt in which the creditor... Read More

Exploring Your Options for a Consolidation Loan UK

Whether you're wanting to consolidate your debt to avoid bankruptcy,... Read More

Avoid Bankruptcy

The first but definitely not the easiest thought that comes... Read More

Debt Management - Debt Management Fees

Debt management fees can vary vastly from one company to... Read More

How To Get Rid Of Debt Problems Step 2 -- How To Prepare A Financial Statement

Here is how to prepare a financial statement, for the... Read More

Pay Off Debt Now: 5 Steps To Getting Your Finances in Order

In our world of dizzying change, nothing is more true... Read More

Cheap Debt Consolidation Loans - Inexpensive Way of Winning Financial Freedom

The rising cost of living can force you sometimes to... Read More

Reducing Debt Through Lower Interest Loans

It happens to the majority of us, credit card debt... Read More

Financial Aid - When Should I Apply For?

Many different types of financial aid are available to you... Read More

Debt Consolidation can Ruin Your Credit

Yes, Debt Cosolidation isn't a good idea and I'll tell... Read More

A Simple Question We All Wonder - Are Debt Settlement Companies Scams?

Are debt settlement companies scams? It's a simple question so... Read More

Debt Consolidation: Why And How This Strategy Often Backfires!

Debt consolidation solutions, has found that as good as it... Read More

Debt Consolidation Primer ? Four Things You Can Do to Get Out of Debt

Problem debt is rampant throughout America. In addition to mortgages... Read More

Getting a Debt Consolidation Loan with Bad Credit

If you've ever tried to get a debt consolidation loan... Read More

Debt consolidation ? More Options for Reducing Credit Card Costs

Borrowing money against your credit cards has always been among... Read More

No-Cost Student Loan Consolidation

No-Cost Student Loan ConsolidationA no-cost student loan consolidation ? doesn't... Read More

The Pros and Cons of Debt Consolidation Loans

You are swimming in debt. You have 4 credit cards... Read More

Guide to Debt Consolidation Loans

Here is a useful guide to Debt Consolidation Loans. A... Read More

Planning To Become Debt Free With A Consolidation Loan

If you have multiple debts, and are struggling to meet... Read More

Shocking Facts - What Debt Settlement Companies Dont Tell You

If you're thinking about using a debt consolidation or debt... Read More

Debt Consolidation Loans: Thousands Now Out Of Debt, Who Never Thought They Would Be!

A Debt consolidation loan: Is a personal loan you use... Read More

Credit Counseling ? Six Tips to Avoid Counseling Scams

Credit counseling is a useful service for anyone with problem... Read More

Debt Consolidation ? Can You Negotiate with Your Credit Card Company?

The average American household has nearly $10,000 in credit card... Read More

What is a Debt Consolidation Loan?

If your objective is to reduce interest rates and lower... Read More