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HOME EQUITY LOANS & LINES OF CREDIT

Home equity lending has emerged as one of the more significant personal finance trends on the economic horizon as rising interest rates quell the refinance boom, bank executives say.

"Many homeowners are sitting on more equity in their homes than they realize, particularly in a recently robust real estate market like Las Vegas."

A home equity loan, sometimes called a second mortgage, is a one-time loan secured through equity in the borrower's home as collateral. Equity is the difference between the appraised value of a home and the current principal balance on the mortgage. Learn more about Las Vegas mortgage loans.

Jill Amonica, vice president and mortgage loan officer for BankWest of Nevada, said she's definitely seen an increase in home equity loans this year.

"Most people refinanced over the last three years, so they're already at the lowest possible interest rate," she said. "Rather than paying to refinance the whole amount again to pull out equity, they're moving toward getting a home equity line behind that."

In Las Vegas, where Las Vegas Homes for Sale are appreciating at double-digit rates, it makes even more sense to take out a home equity loan because of increased values, Amonica said.

"It doesn't make sense to refinance $300,000 to pull $20,000 out," she said. Regan said equity loans are often used for home repairs and remodeling, college costs, debt consolidation, automobile purchases or perhaps to cover unexpected medical bills.

Interest rates on home equity loans are tiered, starting at prime, which is now 4.25 percent, and going as high as prime plus 1.5 percentage points, depending on the loan amount, Amonica said.

Another option is a home equity line of credit, which works somewhat like a credit card but is drawn against the equity in a home, allowing the borrower to obtain cash as needed. Monthly payments vary based on fluctuating interest rates and the amount drawn against the line of credit.

Interest paid on a home equity loan may be tax-deductible.

"What I'm finding is a lot more people are taking home equity loans to buy investment property," said Angela Turner, loan officer for First National Bank of Nevada.

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