Tennessee Home Equity Loan and Tennessee HELOC Basics

A powerful tool utilized by many is leveraging the equity in their home with a home equity loan.  They can use this money to finance everyday expenses or even as capital to start major projects.  Whatever value you have in the property you own is your equity in your home.  A simple way to calculate equity in property is to deduct all debts on the property from the current market value of that property.

The more you have paid off your mortgage balance, the more equity you are likely to have in your home.  Also, you may enjoy an increase in your equity if the property value goes up.  Once you have paid all debts and the balance of your mortgage, you will have 100% of the equity of your home.

In Tennessee, it is possible to borrow money against the equity in your home.  Typically this is done by getting a Tennessee home equity loan or a Tennessee home equity line of credit (HELOC for short). Which one is right for you?

Whether you should get a home equity loan or a Tennessee HELOC will depend on a variety of different factors.  In order to help you make the best decision, you must first understand the differences between a home-equity loan and a HELOC.  Below I have outlined the advantages and disadvantages of both types of loans to help you get a better idea which one is right for you.

Tennessee Home Equity Loan Explained

This loan is also referred to as a second mortgage.  It is a specific amount that has a fixed loan rate and fixed monthly premiums.  Your percentage rates and interest rates will stay the same for the whole term of the loan.  You will receive a lump sum for the loan, which you will be required to pay back monthly over the term of the loan.

Oftentimes people find a home-equity loan is the best scenario when they know exactly how much money they will need for financing, and will usually have a specific project or purpose in mind for the money.  How much you pay each month will depend on how much you borrowed and the term of the loan.

Tennessee Home Equity Line of Credit (HELOC) Explained

A Tennessee HELOC is a way to borrow against the equity in your home as well. The difference here is that you'll be able to make withdrawals from your loan as needed, just like you would charge a credit card.  Of course, you can only take out as much as the limit on the loan.  The rate you will pay on this depends on where the primary rate is at and what you can negotiate with your bank.  There will be a monthly minimum that you will be required to pay on the balance of the loan.  It is just like a credit card. 

A Tennessee HELOC can be a viable route in any of the following scenarios:

• Capital for growing a business
• Financing college expenses
• Renovating a home
• Debt consolidation
• To finance a large purchase such as a car, boat or other item with high transaction cost

It is important to remember that when you obtain a Tennessee home equity line of credit loan that you maintain a pattern of responsible spending, especially if consolidating debt.

A home-equity loan or a home-equity line of credit are two tools you have at your disposal to help you have better buying power and to aid you in the face of debt or to help you with a catastrophic event.  Each tool can be beneficial for you in certain situations, and it is wise to know your options.

malcapmortgage.com proudly serves: Nashville, Chattanooga, Knoxville, Memphis, Clarkeville,
Murfreesboro, and Jackson in addition to many other Tennessee cities.