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Ask Shop Rate: Clay, PA

Posted by  on Apr 16, 2009
 
I need $30,000 to start my own business. I have over $200,000 in equity in my house. Do I need to disclose what I am doing with the money if I take out a home equity loan or line of credit on my home to buy the business? And, what is the difference between the two? Hello Clay,

Here are your 2 answers-

1. No, you typically don't need to disclose the need of your 30,000 loan/line request. Sometimes for a new 1st mortgage you will be asked, but not for a 2nd mortgage or line/loan.

2. A line of credit is typically a revolving line of available money that can be accessed not unlike a credit card. It is most often tied to the prime interest rate and therefore is a floating interest rate and not locked. You can draw on it at anytime.
A home equity loan acts much more like a fixed 1st mortgage. Its generally for a shorter term (often 5 or 10 yrs) It has a fixed rate.

Both have minimal closing costs.


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