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

---

Debt Reduction Solutions

Finding solutions to reducing your debt takes some thinking and... 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 Benefits

If you've ever been in a situation where you needed... Read More

Debt Consolidation when You Find Yourself Overwhelmed with Bills, Bills, and More Bills

Many of us find ourselves overwhelmed with bills, bills, bills.... Read More

Debt consolidation ? More Options for Reducing Credit Card Costs

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

Debt Consolidation Refinance Loans - A Great Way To Lower Your Bills

For millions of homeowners, refinancing is the perfect way to... Read More

Negotiate Your Way Out Of Debt

Eliminating your debt is a daunting task. What can you... Read More

Alternatives to Filing Bankruptcy

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

Reducing Debt Through Lower Interest Loans

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

Consolidate Your Credit Card Debt

With the popularity of plastic money in the present age,... Read More

7 Ways to Consolidate Your Debt

If you are in debt, you have several options available... Read More

What is the Difference Between Unsecured and Secured Debt?

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

Debt Consolidation: Reduce Your Monthly Debt Payments Now

Debt consolidation is frequently becoming a very familiar term used... Read More

Pay Off Debt - Get Out Of Debt And Lower Your Monthly Payments

Debt consolidation can be confusing, especially if you have never... Read More

Benefits of a Debt Consolidation Loan

There are many benefits in choosing a Debt Consolidation Loan,... Read More

Debt Consolidation: A Way Out?

When you are living paycheck to paycheck and it seems... Read More

Debt Consolidation ? How to Protect Your Credit Accounts from Theft

Last week, a security exploit at CardSystems Solutions, Inc, a... Read More

Getting a Better Consolidation Loan Secured

If you're looking for the best way to reduce the... Read More

Cutting Your Monthly Outgoing With Debt Consolidation

With consumer debt on the rise, many people have found... Read More

Moving Debt Between Cards Can Save You Money

If you're like most people, you have plenty of credit... 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

How To Get Rid Of Debt Problems Step 1 -- How To Deal With Your Creditors

However far you are along the road of financial/debt problems,... 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

Considering Debt Settlement? What You Should Know

Your credit card bills are stacking up and for whatever... Read More

Guide to Debt Consolidation Loans

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

How to Choose a Debt Consolidation Loan?

If you have decided that a debt consolidation loan is... Read More

Overwhelmed By Student Loan Debt? Consider a Consolidate Student Loan

A consolidate student loan is the perfect solution for people... Read More

Is A Debt Consolidation Loan Your Best Option?

For many people the lure of easy credit has taken... Read More

Debt consolidation ? Options for Reducing Credit Card Costs

Americans are using credit cards more than at any time... Read More

Finding a Low Interest Debt Consolidation Loan

If you are in the market for a low interest... Read More

Debt Consolidation Mortgage: Home Solutions for Integrating Arrears

Credit card debts, auto loans debts, secured loans debts, unsecured... Read More

No-Cost Student Loan Consolidation

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