Aside from the personal tax benefits for interest on tuition costs, home equity loans can offer significant tax benefits to small business if they are used for business purposes. Even though the loan may be borrowed in your personal name, if the whole amount is re-loaned by you to the business and the business uses those funds for business purposes, then the net interest paid on the home equity loans can be tax deductible. We recommend that you discuss this with your tax advisor to take account of individual circumstances.

Home Equity Loans Explained
A home equity loan is a secured loan. A method to release the embedded equity in the home you own. An alternative expression is that homeowners use the equity in their home as collateral. Such loans are often taken out by homeowners that wish to either; finance home renovations, pay for unexpected expenses, pay for higher education or even to refinance your credit cards or fund that ideal holiday.

Essentially this loan creates a charge, or additional charge, against the home until it is repaid. If the borrower already had an existing mortgage then the Home Equity loan will be a second mortgage ranking behind the first mortgage for security purposes, hence the need for the lender to ensure that the borrower has sufficient equity in the home to cover their loan advance

Obviously there are conditions that borrowers must meet before they become eligible for a home equity loan. These loans were historically only available for homeowners that had substantial equity in their home, as well as a good credit history, however many banks and loan companies have become more aggressive pursuing profits in recent years and some have been advancing home equity loans to borrowers with less equity and with less than perfect credit rating credentials.

Should You Use A Mortgage Broker?
Choosing the most appropriate lender is not a simple task these days, as all lenders have multiple varitions that may or may not be right for you. Choosing the style of loan is critical, should it be fixed term and fixed rate, or could it be redrawable and flexible like a credit card facility that lets you minimise interst costs. Also, deciding the best term and repayment structure to suit your personal budget is an important part of the exercise and a broker may get you the best result at no extra cost to you. Well established and reliable brokers have taken the, interviewing and sorting out of borrowers, part out of the equation for many banks, and they like it. So most broker have access to a full range of financial institutions.
Types of loans
Home equity loan rates and terms vary, essentially, loans on your home’s equity fall into one of two types: open ended loans and closed loans. A closed or fixed loan would be for a specific time frame with fixed monthly payments usually up to 15 years in term.

Open ended loans are those most often called a line of credit. With a highly flexible line of credit type loan, the borrower can draw, repay and then redraw, so they treat it like an overdraft and determine when they want to borrow and repay. Much the same as a credit card facility, in fact some of these facilities can be access with a credit card.

Line of Credit type loans usually require a more comfortable home equity for the lender and sound credit history, as they never know what their exposure on that loan will be from time to time except for its credit limit.

A Fixed Term Home Equity Loan Or a Line Of Credit
If you prefer a known fixed monthly commitment, it's easy to Compare the fixed term loans from various lenders to see which gives you the best rates. Read more...