You can also use a mortgage calculator to make sure your calculations are correct. Any the case, you should decide carefully whether you will proceed taking up the home equity loan or not. Special attention is needed if, for example you do have taken out a secured loan already. In that case, following one of the above examples, where your home’s value is set at £150,000 and you owe £100,000 towards your mortgage, plus you have taken out a secured loan of say £20,000, the equity left in your home will not be £50,000, but only £30,000. This means that you are exhausting your financial resources quickly and you could end up into serious debt. To avoid this, first make sure you do not have too many outstanding debts (both secured and unsecured), because all of these amounts have to be paid back, but you also need to retain enough resources for your everyday expenditures, plus take into consideration the event of an emergency which might kick in, and then you need money again.

Now, regarding the types of home equity loans, there are the so to call them “rigid” and “flexible” types. The rigid type of home equity loan means that you take up the loan on the terms specified by the lender, with a term not exceeding 15 years. The good side with home loans in general is that these are secured which means that most possibly you’ll have to pay fixed rates.

Variable rates always bring surprises, so better stick with fixed rate loans, where you can foresee better the payment possibilities, and make your financial management better. It is not a rule, that you can always borrow 100% of your equity, because depending on the lender he might allow you only 60%, 75%, 90%, and so on. This rigid type of borrowing is called closed end home equity loan. If the lender agrees to give you say 75% of your equity which is £50,000, it means you will have access to an amount equaling £37,500, which you will receive as a lump sum and no further possibilities for you to borrow.

On the other hand, the more “flexible” type of home equity loan possibility will be offered to you on terms such as: variable interest rate, flexibility in taking out money (smaller or greater amounts) as needed. In this respect, this type of loan which is called an open end home equity loan, pretty much resembles the credit line you get with the use of a credit card. Here as well, you may be offered a credit equaling the whole amount of the equity (100% coverage), or less.

You can take out money at your discretion as needed, but the term of this type of loan is much longer (up to even 30 years). Whichever you choose, be careful to take the option which best suits your needs, and whichever comes with better terms and conditions. After all, the purpose of taking a loan is to make advances in your life (build, educate, invest smartly for profit), and not retreats so that you’ll find yourself eventually drowned into debts.