Have you lived in your home for a few years now and finally want to add on to it because your family is growing? Or are your kids older and the family would enjoy a pool in the backyard? Or are the ends not quite meeting each month and you need a way out with a debt consolidation? A home equity line of credit may be an option by adding on a second loan to your existing mortgage.

A home equity line of credit is really quite simple. The loan is based on how much you still owe on your property compared to what your house is worth right now. Use this as an example: Let’s say you bought and mortgaged your house for $200,000, 10 years ago. We’ll say you paid down on the loan $35,000 in those 10 years. Now you still owe $165,000. But after an appraisal, your house is now worth $250,000. With most lending institutions allowing 80% of worth being allowed to borrow, you now have $68,000 to use for a home equity line of credit!

A home equity line of credit is a great option if you are adding an addition to your house. Because the way this loan is set up, you will receive checks and this will be a revolving account that you can use as a checking account. There will be a minimum payment due each month, but it will be much lower. This will take down your balance each month, and if you haven’t used all of your home equity line of credit, you may still borrow against it. This has many advantages if you are adding an addiction and will have ongoing bills to pay.

A home equity line of credit may not be a great option for you for debt consolidation. If you already have a problem with plastic cards, and bills are piling up, a home equity line of credit is a risk you best avoid. A fixed payment without the ability to draw from it will be better for those that can’t stop using credit. Remember if you use this method to pay off other bills, make sure you don’t use this home equity line of credit to make other payments on other accounts just because you don’t have the money that month! You shouldn’t “beg from Peter to pay Paul” for that payment each month.

Once you have decided that a home equity line of credit is the best option for you will need to contact a financial lender for information. They will be able to tell you interest rates, how many years you can take a home equity line of credit on for, find out any charges and get an application for you to fill out for approval. There will be an appraisal done. You can also do checking for a home equity line of credit online before you contact that lender. They will have a calculator on their site to give you payment information. And remember that most of the time the interest is tax deductible!