If you have equity build up in your home and need extra money for some reason then a home equity loan or line of credit may be the right solution for you. The line of credit is similar to a mortgage in that it is taken out against either the equity in your home or the home itself. Then the line of credit is available to you to use how you need. You will only pay interest on the portion of money that you use.

Generally, you are given a specific period of time where you can withdraw the money and there is often a minimum amount you can withdraw. Then you’ll begin the repayment period with also has a minimum amount.

Interest rates on a home equity loan are fixed for a short amount of time and then goes to an adjustable rate. The rate is adjusted according to the market, which means it can become pretty high if the market is bad.

There is also an annual fee associated with most home equity loans as well as other normal mortgage fees. You should watch out for an additional fee known as a margin that is added to your payment each month in some circumstances.

A home equity loan has the potential to be a great help for home improvement projects and the like, but be careful that you don’t use more money than your home is worth. This can create negative equity in your house and take a long to recover from. And as with any loan be sure to shop around for the best rates you can get.