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Using
the security of equity in your home, a home equity credit
line is a revolving credit line account. This type of loan
has a variable interest rate based on the prime rate. The
loan can be active for a long period, most typically for 10
to 15 years. During this period, you have the option of making
interest-only payments or regular amortized payments. At the
end of the line of credit period, the existing balance may
be converted to a standard loan.
The
major difference between a home equity credit line and a home
equity loan is that with a credit line, you withdraw funds
only as needed. For example, the line of credit may be for
$80,000, but you only need $20,000 for a down payment on a
great investment property I found for you. You can draw on
the line of credit for only the $20,000 needed and pay interest
on the actual amount you have just used.
Many
lenders will extend a credit line of up to 100% of the value
of your house. A home equity credit line is available for
owner-occupied single-family homes, condominiums, and townhomes.
The interest may be tax deductible because an equity credit
line is secured by your primary home, but as always check
with your tax advisor.

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