A Home Equity Loan is very useful when you do not need to refinance your original loan, but want to access the equity in your home and put it to good use. A home equity loan is a second mortgage that uses the equity in your home as the security against the lender’s risk.

Several types of Home Equity Loans exist, including the related Home Equity Line of Credit, which allows you to use the equity in your home like a checking account or an open line of credit like you would receive at your local bank.

Getting Money from Your Home

Closed-End Home Equity Loan – This is a standard type of home equity loan that is the simplest to manage- Once you obtain the loan for the amount that you need, the lender issues you a check in the amount of the loan for you to manage as you please. After that, you will receive a monthly mortgage statement in addition to your regular one until the second mortgage is fully paid off.

Open-End Home Equity Loan – Commonly known as the Home Equity Line of Credit, or HELOC, this loan creates a standing credit line in the amount of your available equity. Many banks will give you a checkbook or a debit card to use to access the funds. Your monthly mortgage statement will only reflect your current balance, much like your credit cards already do. These types of equity loans are perfect for home remodeling projects, as you can use just what you need to complete the work. Another great use is as a reserve account for a college fund. This allows you to leverage the payments so that you can repay the balance in a managed fashion.