As the home is very often the most valuable asset someone has, many homeowners use home equity credit lines only for major purchases such as education, home improvements, or hospital bills, rather than using them for day-to-day expenses.While the actual details of a home equity line of credit can be complex, depending on the lender, at their most basic, they work where someone is approved for a specific amount of credit determined by the lender.  Usually, a lender will work this limit out by taking a percentage of the value of the home, such as 80%, then subtracting the balance outstanding on the mortgage from that percentage.  In this case, if the home was valued at 100,000 dollars and you owed 40,000 dollars on you mortgage, you would have an available credit line of 40,000 dollars.  Again, this is an overly simplified example, as the lender will take other factors into consideration such as other debt, credit history, financial obligations, and your income. 

There are many other optional issues with home equity lines of credit.  Some set fixed time periods over which the money may be borrowed.  Of these, some plans offer renewals, and some do not.  Sometimes, a lender will set a minimum on the amount withdrawn, such as a 100 dollar minimum withdrawal.  Some plans require an initial withdrawal as well.  When it comes to repayment, some plans require the full balance to be paid by the end of the term, while others offer a fixed time period after the term ends for the balance to be paid in full.

What To Look For

There are a variety of home equity lines of credit available.  Some will meet your needs better than others.  As with any credit agreement, the annual percentage rate (APR) doesn’t tell the full story.  Some lenders have costs and fees associated with starting the line of credit, and most agreements will have some kind of closing cost or other fees, which must be considered in the complete package in addition to the interest on the principal.  There are a myriad of fees which one must keep in mind when choosing a lender.  Some have annual fees or membership fees throughout the life of the agreement.  Others may charge transaction fees with every withdrawal.  Obviously, the fewer additional fees, the better, but you may find it is more a process of weighing one lender’s fees against another.  Lenders tend to charge more for these kinds of loans than some others as they are less secure. 

When it comes to interest rates, it is important to remember that most home equity lines of credit are based on variable and not fixed interest rates.  This means that your interest rate may go up or down, depending on the value of the index the lender uses as a reference.  While there is a legal cap on how much your interest can increase, some lenders also use their own cap for how much it can be reduced, should the value of the lenders chosen index go down in value.  Some lenders who start you out with a variable rate interest will allow you to convert to a fixed rate at some point during the life of the credit agreement. 

Again, depending on the lender, you may be required to pay off the entire loan immediately if you sell your home.  Many lenders also do not allow the dwelling to be rented while the home equity loan is active.  Balloon payments at the end of the term, as well as interest only payments, should be watched closely as well.  The vendors are going to have protection built into the loan as well as profit.  One should look for the vendor who is profiting the least while still maintaining reputability.

Where To Look Online

While it’s a good idea to research any purchase online, with the myriad of variables and lender specific terms and fees, significant research should be done when finding a home equity line of credit online.  Some good places to start your search would be:

www.bankrate.com – This site has an excellent comparative section for finding home equity lines of credit online.  It features charts and graphs showing the latest trends in home equity loans from various lenders including weekly averages and local rates.  They also feature calculators to help determine costs and helpful feature articles to help you better understand the risks and details of a home equity line of credit.  This is a good starting place when finding a home equity line of credit online.

www.wellsfargo.com – Wells Fargo is one of the nation’s largest lenders and offers home equity lines of credit online.  They have a simple application process and offer a variety of home equity lines of credit in 25000 dollar increments.

www.chase.com  Chase bank is another large lending institution that offers online home equity line of credit applications.  They offer a variety of levels of home equity lines of credit online, as well as tools and calculators to help find the value of your home, debt consolidation, and a significant amount of information to help you better understand the details and risks of finding a home equity line of credit online. 

Finding home equity lines of credit online can be confusing because of the number of details and the various fees and obligations outlined by each individual lender.  However, using the tools available online, you can find the best deal for you with terms you can abide by.  Remember that the home equity line of credit is based on the value of your home.  If a vendor seems to have too many or too steep fees, or certain parts of the agreement you do not feel you can agree to, there are many reputable institutions offering home equity lines of credit online for you to choose from.