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There are two very popular home equity loan products used by home owners to have access to some cash. The products or programs are known as home equity loan and Home Equity Line of Credit (HELOC) or simply Home Equity Line. There is a significant different between home equity loan and HELOC. This article talks about the latter.

A home equity line of credit or heloc is like a credit card with your home used as collateral. The credit line will be assigned a predetermined amount or credit limit once it's approved. The credit limit is calculated by the lender based on your home's market value. For example, if your credit limit is set at $50,000; that means you could withdraw money up to $50K.

Many people use these loan programs for unforseen emergencies or short-term financial help such as home improvements, finance a college education, paying off medical bills or even paying off other debts like your credit card debts.

Nowadays, most people would prefer a Home Equity Line of Credit over a home equity loan; this is because HELOC only charges you interest on the amount used (you don't pay off the principal) as opposed to a home equity loan where you must pay interest on the entire loan for the full term.

When you've been approved with a HELOC, a "draw period" will be set (normally 5-10 tears); you can withdraw money during this period so long as it is below your home equity credit limit. During the draw period, you make interest-only payments on the loan. After the draw period ends, the loan goes into a "repayment period" (normally 10-15 years). However, the lender could set its own draw and repayment periods.

If you apply for a home equity line of credit, make sure you check if the lender provides you a credit card and special checks. This is for your convenience sake because there are lenders who don't offer credit cards or special checks. Believe me, it's a lot more convenient if lender offers credit cards because you can manage and repay your loan via telephone or internet.

Another thing you need to be aware of is that there is an application fee for HELOC and this fee is not refundable if your application is denied. There are also other fees such as title search, attorney fees, taxes, and filing of mortgages. So make sure you do your homeworks and negotiate with your lender to lower or waive some of these costs.

Hope this short article is useful in helping you to understand the distinction between a home equity line of credit and home equity loan.

Check out home mortgage loans guide if you want more information on how to increase your home equity and save money in your mortgage. You can also download a FREE report and explore various types of home mortgage loans topics at our site.

People refinance their mortgages for many different reasons. But the end goal is usually the same in all cases -- get a better interest rate!

Improving your credit score is a crucial step in qualifying for a better interest rate. Sure, you can refinance to take advantage of a more favorable market. But when you improve your credit score at the same time, you could get an even lower rate. This, of course, translates to a small mortgage payment each month.

Maintaining a Good Credit Score

When it comes to your credit score, an ounce of prevention is worth a pound of cure. It's a lot easier to maintain good credit than it is to recover from bad credit. So the best strategy is to stay out of that "neighborhood" to begin with. That way, when the time comes to refinance your mortgage, you'll be more likely to qualify for the best rate.

Five Steps to a Better Credit Score

1. Debt-to-Income Ratio

Try to keep your debt-to-income ratio at 20% or below. Mortgage lenders like it when your overall debt equals no more than 20% of your net monthly income. If you're currently above the desired 20% mark, try to pay down your debt as quickly as possible.

2. Reducing Balances

Keep your credit card balances as low as possible. When these balances get out of control, it increases your overall debt. This leads to an unfavorable debt-to-income ratio (previous item).

3. Paying Bills

Pay all your bills on time. You've probably heard this one before, but that's only because it goes hand in hand with a good credit score. On the contrary, a history of late payments will lower your score.

4. Paying Minimums

Pay your minimum balances. Every time you receive a credit card bill, pay at least the minimum amount that's due. If you can pay more than the minimum, that will certainly help. But at the least, pay off those minimums religiously. This will reduce your credit card balance more quickly and help you reach a favorable debt-to-income ratio (as mentioned above).

5. Controlling Credit

Avoid taking on too many loans. If you apply for a line of credit too often, you might send a signal that you cannot manage your finances.

Refinancing your mortgage to take advantage of lower interest rates can be a smart financial move. But when you refinance with good credit, you stand an even better chance of lowering your interest rate. So be proactive in maintaining a good credit score.

* Copyright 2007, Brandon Cornett. You may republish this article online if you retain the active hyperlinks below.

About the Author
Brandon Cornett is publisher of Mortgage Refinance Advice, an educational website designed to help consumers educated themselves on all aspects of mortgage refinance. You can learn more by visiting http://www.mortgage-refinance-advice.com