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The #1 Source of Additional Funds for Homeowners

July 01, 2019

Homeowners who need additional funds to pay for college, buy a second home, consolidate high-interest debt, or pay for a special event often find themselves unnecessarily stumped by the question “How am I going to pay for this?” Many homeowners can avoid accessing savings or borrowing against a retirement account to pay for these and other expenses. They can do so by tapping into the equity in their home.

The greater the distance between your existing loan principal balance and the market value of your home, the greater the equity. Market conditions, along with your monthly reduction of the principal balance, contribute to the amount of available equity in your home. Using a home equity loan or home equity line of credit can be a low-cost way to borrow money when you need it most and there may be some tax-advantages  as well.

How Does a Home Equity Loan Work?

A home equity loan is comparable to a primary mortgage in that it’s dispersed in one lump sum with a set repayment term. These fixed rate loans are easy to fit into your budget since payments are the same each month until the loan is paid in full. Requirements vary by lender.

How Does a Home Equity Line of Credit Work?

A home equity line of credit is approved for a certain amount and accessed as needed over the approved draw period, which can be up to 25 years. During this time, borrowers can use up to the approved credit limit and make interest-only monthly payments or repay both principal and interest. Once the draw period ends, payment on the principal balance is required.

This revolving loan is similar to a credit card, in that as you pay down the principal balance, the available credit amount increases. Interest rates are often variable, which means monthly payments may change. Funds are typically accessible via check, online transfer or in person withdraw although some lenders provide additional options.

Home Equity Loan vs. Line of Credit

In both cases, homeowners are borrowing money and using their home as collateral. Each borrowing option has a unique set of advantages.

Borrowers who prefer home equity loans typically:

  • Favor predictable monthly payments
  • Want to lock in rates today
  • Have a specific purchase in mind before applying for the loan

Borrowers who prefer home equity lines of credit typically:

  • Don’t need the funds today, but will sometime in the future
  • Plan on using the money for purchases spanning several months or years, e.g., home improvement projects completed in phases, college tuition, etc.
  • Want to avoid using high-interest rate credit cards to pay for large purchases

Do I Have to Choose?

Many financial institutions either offer a home equity loan or a home equity line of credit. But, what if you could have the best of both worlds? ENB has taken the predictability of a home equity loan and the flexibility of a home equity line of credit and created HomeLine, a simple way to access your home equity that makes sense for your changing needs. Homeowners no longer need to decide between a home equity loan and a home equity line of credit. Once approved, borrowers can draw on their home equity for up to 25 years while locking in competitive fixed interest rates.

How Do I Qualify?

As with other loans, your credit score, income, debt-to-income ratio, and employment history will factor into the approval decision. Many lenders will also consider the equity available in your home based on a real estate appraisal. However, at ENB, an appraisal is generally not required if you intend to borrow less than $250,000 on a primary residence, and the property size is 10-acres or less. The approval process takes only a few days from application.

You need not wait until you sell your home to access its equity. Experience the assurance of predictable payments and the flexibility of accessing funds as you need them. Apply for an ENB HomeLine today and give yourself the freedom to enjoy more of life.