Home Equity Loan is another popular style often used for business purposes. Basically, the home equity loan is a second mortgage on an already existing mortgage in which the homeowner uses the equity of their home against the amount borrowed.
Use of equity
The two main categories of home equity loans include the fixed rate loan and the line of credit loan. These two are also popular, but usually chosen according to the needs and compatibility of the borrower at a time when money market funds are a problem.
Fixed rate loan
The fixed rate loan provides a single, one-time payment to the borrower in which the repayment is made over a specified period of time and at a fixed amount. Payment and interest do not change during the agreed period.
The style of lines of credit, however, differs in the basic dispersion of the amount borrowed. The initial amount is usually offered and agreed at the beginning of the agreement; however, the amount may be taken in portions required at a given time and for a particular duration. The monthly payments will vary according to the dispersed amounts since the interest is calculated only on what was used and not on the total amount. However, all amounts due must be fully repaid at the end of the due date of the agreement.
Home equity loan
The home equity loan provides a relatively easy source of cash, even though interest rates are higher than the first mortgage, it is still a more viable way of acquiring cash quickly. It was noted that in addition to using money for commercial purposes, home equity lines of credit are also recommended as a better option to use than credit card advances because interest rates are much lower. There are also better benefits of tax relief in the use of the home equity loan option.