When home values rise and the Prime Rate declines, many gay and lesbian homeowners have the opportunity to obtain a home equity loan or line of credit and access the equity funds generated by their home’s appreciation.

Many homeowners may not think about tapping into their home’s equity as a way to pay for their next big purchase or project, whether it be buying a car or remodeling the kitchen. In fact, funding such projects through a line of credit or a home equity loan can be a smart choice for some homeowners.

Lower Interest Rates. When the Prime Rate is down, so are interest rates on most home equity lines of credit. Also, home equity rates are often more favorable than credit card interest rates. 

Get More for the Effort. In many instances, a homeowner can tap up to 100 percent of the home’s equity through a home equity line versus 90 percent by refinancing. 

Shorter Pay-Off Time. Home equity loans and lines of credit usually must be paid off in a shorter time than long-term mortgages. Loan terms on fixed rate home equity loans can be 10, 15 or 30 years. Home equity lines of credit typically have a 10-year “draw” period in which the line of credit is open for re-use as it is paid off. After the draw period, the principal and interest are paid down over 15 years. 

Refinancing Alternative. Homeowners with already low-interest first mortgages might not benefit from refinancing, but they can take advantage of the appreciation in their property value by accessing a home equity loan or line of credit. Many homeowners took advantage of the last refinancing boom to lower the interest rate on their first mortgages. Now, they may desire funds to make home improvements, pay for college, or a variety of other needs. Instead of refinancing their home again, they can take out a home equity loan, have cash for their needs, and possibly gain a tax advantage by deducting their interest payments. For details on the tax advantages, homeowners should check with their tax advisor. 

Continual Access to Funds. As a homeowner pays off the line of credit, that same amount of credit becomes available again. With this option, there is no need for homeowners to apply for a new loan every time they need additional funds. Lines of credit also offer payment flexibility, allowing borrowers to pay interest only or making lump sum payments if they wish.

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