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

---

Ebooks, Scripts, Websites, and more...

Adsense websites

How to Choose a Debt Consolidation Loan?

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

Vultures and Victims

Has anyone noticed how many loan companies now fill up... Read More

Credit Card Purgatory - A 7 Step Comprehensive Plan to Get and Stay out of Credit Card Hell

Does this Sound like You? There are 100 shopping Days... Read More

What is Debt Consolidation?

Debt consolidation may be the answer for anyone drowning in... Read More

What You Need to Know About Debt Consolidation

Debt consolidation is often a last resort for people who... Read More

Is A Debt Consolidation Loan Your Best Option?

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

Debt Consolidation - Just Lump It All Together!

In a world where people use credit as much as... Read More

How To Get Rid Of Debt Problems Step 3 -- How To Negotiate Reduced Payments With Creditors

First, make a list of your creditors (NOTE: you should... Read More

How To Get Rid Of Debt Problems Step 4 -- How To Get Interest On Your Debts Frozen

The first thing to understand is that there is categorically... 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

Financial Aid - When Should I Apply For?

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

Private Student Loans ? Dispelling The Myths

Private Student Loans ? dispelling the mythsIf savings, grants, scholarships,... Read More

Debt Consolidation Loan

Debt Consolidation of Different LoansDebt consolidation refers to the restructuring... Read More

Online Debt Consolidation ? Devising Newer Ways for Changing Consumer Trends

Consumers today are getting wiser by the day. They are... Read More

Going Debt Consolidation Way!

We are aware of the fact that it is easy... Read More

Debt Consolidation: Friend or Foe?

Debt consolidation has become big business in this country over... Read More

The Burden of Debt

Over recent years personal debt in the UK has exploded.... Read More

Debt Consolidation Solution

Debt Consolidation is a solution that solves your debts. Debt... Read More

Finding a Reputable Debt Consolidation Company

If you are looking for a company that will help... Read More

Individual Voluntary Arrangement IVA, an alternative to bankruptcy

Individual Voluntary Arrangement, IVA is an alternative to bankruptcy -... Read More

Are You Buried In Debt?

Are you having a problem paying your bills? Are you... Read More

Debt Consolidation ? Be Careful When Trading in Your Car

The automobile has long been recognized as the classic American... Read More

Debt Consolidation ? Consolidate Your Student Loans Now!

The Federal student loan program has benefited thousands of college... Read More

Debt Consolidation: How it Works

As long as consumerism flourishes most of us will be... Read More

Consolidating Your Government Student Loans

A Consolidation Loan allows you to combine your federal student... Read More