An equity
line of credit is a 2nd Trust Deed because the line of credit itself is
attached to your property. Our equity line of credit
has a draw period of 7 years. After 7 years, you start to repay whatever
balance is left for a period of 15 years. In other words, it becomes a
fully-amortized 15-year note at the conclusion of the 7-year draw period.
Therefore, this is a 22-year loan if you choose to stay in it that long.
Your payment on
our home equity line of credit is based upon the existing balance you presently
owe. Here’s an example. Let's say you have an equity line of credit with a
monthly payment of $100 based upon the fact that you currently owe $25,000. If
you pay an extra $2,000 on that line of credit this month, then next month your
balance is $23,000. Like a credit card, your payment will immediately decrease
because that payment is based on the balance you owe, not on the original
indebtedness as in a fully-amortized fixed rate note.
Where it
differs from a credit card, is the fact that it's tax deductible. In fact, you
can take all of your credit card debt and pay it off with one new loan as an
equity line of credit, thereby creating a tax deduction you don’t presently
have with your credit card debt*.
Beyond that, another interesting component to it is the ability to draw back
against it at any time.
Upon the
closing of your loan, you will receive a checkbook in the mail within 10
business days. This checkbook is your means for drawing against your equity
line of credit.
* Consult
your tax advisor