California Mortgage Choices: Why the Home Equity Line of Credit Looks so Good

By Gil Mackey
Mortgage Credit Problems Columnist

Are you interested in starting a major home improvement project? Do you have kids about to head off to college? Or do you just want access to extra cash in case you need it for a financial emergency or investment opportunity?

Tapping Into Your Home Equity

When it comes to tapping into your home equity you have many choices. You can refinance your California mortgage and take some cash out in the process, you can take out a second mortgage in the form of a fixed home equity loan, or you can take out a home equity line of credit, or HELOC. How do you know which one to choose?

If your California mortgage has a low rate and favorable terms than you should probably leave it be. In this case you ought to look at some form of second mortgage. At this point you have to ask yourself: what am I going to use this loan for? Your answer will dictate whether you should simply get a fixed rate home equity loan or a HELOC.

Home Equity Loans

If you want a loan that delivers a lump sum for debt consolidation or medical expenses for example, then a fixed home equity loan is probably the answer. The payment won't change and the rate is probably lower than that of a HELOC.

But if you want to start a lengthy remodeling project, pay annual college tuition, or if you simply want access to extra credit just in case, a home equity line of credit is the answer. With a HELOC you are given a line of credit (similar to a credit card account) that you can draw against when you want to. You get approved for a certain amount, but you don't actually borrow it (or pay interest) until you use it--and you can pay your balance back down and reuse it, too. Many newer HELOCs even give you the opportunity to fix your interest rate at one or more times during the loan term. Ask your mortgage lender for details to find out which is right for you.

About the Author
Gil Mackey has been a writer and artist for the past twenty years. In addition to freelance writing, Gil writes for his local paper, and lives with his two children in Nevada.

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