Florida Home Equity Loan and Florida HELOC Basics

Florida home equity loans help you tap into your home equity enabling you to finance large projects, consolidate debt or cover major expenses.  Equity is how much value you have in the property you own.  You can calculate your value by taking the current market value of your property and subtracting away all unpaid debts on the property -- things like your mortgage loan, liens and so forth. What's left is your equity.

As you pay down your mortgage, your home equity increases.  Also, if your property value increases, your equity will increase.  When you have paid off all outstanding debts on your home, you will own 100% of the equity in the property.

You can reap the benefits of using your equity to secure a large loan.  There are two traditional ways this is done -- with a Florida home equity loan or a Florida home equity line of credit (HELOC).  Your home equity is something that can -- and should -- be leveraged.

Which loan is right for you, a Florida home equity loan or a Florida HELOC?  Each has their own advantages and disadvantages.  Below we will discuss the pros and cons of both types of loans as well as give you perspective to determine which loan is most appropriate for your situation. 

What Is a Florida Home Equity Loan?

A home equity loan is when you are awarded a specific amount against your equity, which you will pay with fixed monthly installments at a fixed loan rate.  A home equity loan is also known as a second mortgage.  Your annual percentage rate and your interest rates will be determined by the lending institution, but they will remain the same during the term of the loan. 

Many people take out a Florida home equity loan when they have a specific purpose for the money.  For example, if you were going to purchase a second home, or a new car, and had a good idea of the exact amount of money you need, then a home equity loan is probably the way to go.

The amount of money you will be required to pay each month will depend on how much you borrowed against your equity and the term on the loan.

What Is a Florida Home Equity Line of Credit (HELOC)?

When you get a credit card, you are issued a line of credit.  When you borrow against your home equity in the form of a HELOC, you'll be issued a line of credit against the equity in your home.  Instead of being awarded one lump sum, you'll be assigned a certain amount which you can borrow from as you need.  Typically your interest rates will depend on your credit score as well is what the current rates are.

You pay back your HELOC loan much like you would pay back credit card debt.  At the very least, you will have to meet the minimum monthly requirement on the balance.  Besides that, how much you pay each month will be determined by you.  A HELOC loan is perfect for ongoing expenses.  For example, many people use a Florida HELOC for scenarios such as:

• Growing their business
• Funding education such as paying for college tuition
• Making improvements on the home
• Consolidating other loans and credit card debt with higher interest rates
• Facing uncertainty of employment
• To help finance a large purchase (boat, car, home furnishings, etc.)

It is important not to use a Florida home equity line of credit in an abusive way.  Do not borrow more than you can pay back, otherwise you will end up paying higher interest rates, or lose all the equity in your home.  In either case, it's important to know that you have two powerful tools at your disposal if you have equity in your home.  If you're facing a large expense or need to make a big investment, you should consider either a home equity loan or a home equity line of credit.

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