Interest - Home Equity Line of Credit

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Interest – home equity line of credit require a minimum payment of only the monthly interest due.

Its doesn’t matter that how long you lived in your house, you may have enough access to equity and that can reduce your tax liability, reduce your interest payment on other high-interest debt, or pay education fees, home improvement or use for other purpose also.

Monthly payments will vary, depending on the outstanding balance and fully indexed rate. Interest is calculated the day after principal payments are made. Because the borrower pays interest only on the outstanding Home Equity Line of Credit balance, a substantial savings can be used by paying the loan off early. Also, payments to the principal immediately reduce the monthly payment, saving the borrower hundreds or even thousands of dollars.

Home equity line of credit is considered to revolving kind of credit, similar to credit card. Thus, during the draw period, the available balance can be used till balance on the home equity line of credit is paid down.

A draw period is a periodic advance of funds against the line of credit. When the borrower who takes home equity line of credit, makes a minimum payment during the draw period, funds are applied towards interest only, not principal. The repayment period is considered to be, the remaining term of the loan after the draw period. During the repayment period, the borrower can not draw, down funds from the Home Equity Line of Credit. When the borrower makes a minimum payment during the repayment period, funds are applied towards interest and principal.

Interest-only home equity lines of credit have a "draw" period of up to 15 years, which is followed by a repayment period of up to 15 years. Some lenders will allow you to choose the minimum repayment schedule. You can pay the minimum amount or the entire amount. This is one of the greatest features of the home equity line of credit. The minimum amount required may vary by lending institution. Make sure that the minimum payment required pays the entire interest charges for the month. You want to avoid the situation where the payment does not cover interest charges for the period and any unpaid interest is added to your borrowed amount.

In interest line of credit extended line or loan amounts may vary by lending institution to institution. These amounts are determined by taking a percentage of the appraised value of your home and subtracting the balance owed on the existing mortgage. You can choose how much you can pay each month when your statement becomes due.

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