How To Open Home Equity Lines

Many homeowners wonder how to open home equity lines of credit when there is a sudden need for a large amount of money.  There are many risks involved in opening a line, but it can sometimes save a family from potential disaster.

Home equity lines are obtained through a lending institution.  This could be a bank, or a service that is specifically focused on home equity credit lines.  Before approaching the lender, you should have the following information available:

  • Recent appraisal of your home showing the current market value
  • Amount of money still owed on the mortgage for the home
  • Household income
  • Monthly household expenses

The lender will be assessing several things.  First, they will want to determine what your credit line might be.  They will also be looking at your ability to make the monthly payments on the home equity lines, should you use them.

In most situations, lenders will offer home equity lines of credit that are about 70% to 85% the value of the home.  They deduct the money still owed on the mortgage, and then take income and debts into consideration.

To open home equity lines of credit that are near the maximum amount available, be sure that your credit history is in good shape and keep credit cards, utilities, and other bills up-to-date.  In a perfect scenario, this could allow you to obtain lines of credit equal to 85% of your home’s value.

It is also important to understand that there are risks involved when you open home equity lines.  Namely, you are risking the loss of your house.  You are also risking damaging your credit score if payments are not made on time and in the correct amount.

To avoid surprises, make sure that you have read, and fully understand, the contract that the lender will present.  There are many different costs that can accrue when you open home equity lines of credit.  From title search charges to administrative fees, you should know in advance how much it will cost just to open the line.

Finally, know the interest rate.  It could be fixed or variable, and both usually come with stipulations you need to be aware of for the entire duration that the credit line is available.

When money is needed for home improvement, unexpected medical bills, or even day-to-day expenses in crises, the ability to open home equity lines of credit can spell the difference between ruin and recovery.


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