Question:

Home Equity Loan Definition

Answer:

A home equity loan (HEL) is a loan taken against the equity in your house. It resembles a second mortgage, but sometimes interest on HELs can be deducted from taxes and this makes home equity loans more appealing in some cases.

Home Equity Loan Types

Closed-end HELs - the borrower receives usually 80 to 100 percent of the available equity in cash and is not allowed to borrow more. Sometimes, the home equity loan will be over 100 percent of the equity. Closed-end HELs usually amortize for 15 years or less.

Open-end HELs are the so-called HELOCs - home equity lines of credit - and operate on revolving basis similarly to credit cards. With a HELOC one can borrow as much as with a HEL, but the repayment period may be spanned over 30 years.

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