Once you've decided which option is best for you-a home equity loan or a home equity
line-you'll need to determine how much you can borrow.
Depending on your creditworthiness (your income, credit rating, etc.) and the amount of your
outstanding debt, home equity lenders may let you borrow up to 85%* of the appraised value
of your home minus the amount you still owe on your first mortgage. Ask the lender about the
length of the home equity loan, whether there is a minimum withdrawal requirement when you
open your account, and whether there are minimum or maximum withdrawal requirements after
your account is opened.
Inquire how you gain access to your credit line -- with checks, credit cards, or both.
Also, find out if your home equity plan sets a fixed time -- a draw period -- when you can
make withdrawals from your account. Once the draw period expires, you may be able to renew
your credit line. If you cannot, you will not be permitted to borrow additional funds.
Also, in some plans, you may have to pay your full outstanding balance. In others, you may
be able to repay the balance over a fixed time.
*Please note: Some lenders in The LendingTree Network will lend up to 100% of the
appraised value of your home. A few lenders will even let you borrow up to 125% of the
appraised value.
This information is adapted from "What You Should Know About Home Equity Lines of Credit
When Your Home Is on the Line" published by the Federal Reserve Board and the Office of
Thrift Supervision and from "FTC Fast Facts - Home Equity Credit Lines" published by the
Federal Trade Commission.