How to Pay for Your House with a Home Equity Line of Credit
When you have paid on your home for a while, you create equity in your home. Equity is the value of your home minus the amount still left on the original mortgage. If you have created significant equity, then you can ask the bank for a line of credit based on the equity. The line of credit can be used for any purpose including paying for your home.
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Instructions
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Get your house appraised. Since the line of credit is based on the equity raised in your home, you should have the house appraised to get its maximum value. Houses in certain developing areas can raise in value very quickly even in just a few years and could make a big difference in your overall equity and thus the size of your line of credit.
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Get the line of credit. With your new appraised value in your mind, apply for a home equity line of credit at the bank. Depending on your credit history and score, the bank will approve a percentage of the total equity to be available in the line of credit. The more equity you have, the more money will be available in the line of credit.
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Check out your mortgage. It only makes sense to use the line of credit to pay for your house if the amount you have available covers the amount owed on the mortgage and if the payments and interest rate of the line of credit is better than the original terms of the mortgage. A line of credit offers minimum monthly payments that are likely significantly less than a house payment, but it will also take many years to pay off using only minimum payments.
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Examine your other options. Before committing to using the line of credit to pay for your home, you should examine the other options available to you such as refinancing the mortgage or a home equity loan. With all the cards out on the table, you can make an informed decision on whether using the home equity line of credit is the best option for your situation.
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Pay off your house. With the decision made, go to the bank and pay the remainder of your mortgage using the line of credit. There will be many papers to sign and in the end, you will receive the deed to your home, which you now own free and clear. Be sure to keep up the payments on the line of credit as the lender has the right to go after your house if you default on the loan.
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