Home Equity Loans
HOME EQUITY LOANS are a way of borrowing against the equity in your home. Because these loans are secured by your home, low interest rates are available.
A home equity loan is especially useful in paying off existing higher interest debts, paying for home renovations, or getting cash out for other expenses.
A great benefit of home equity loans is that your interest payments are tax deductible. An equity loan can be repaid over time with a fixed interest rate and can be as large as a 125% of the equity you have in your home. A home equity line of credit (HELOC) is similar to a home equity loan except money can be taken out as needed rather than as a lump sum. Once you are approved for an amount, you can take out cash, and repay repeatedly out of the total amount without doing more paperwork. Another benefit of a home equity line of credit is that you only pay interest on the money you have actually borrow as needed.
To calculate your potential credit you can do a calculation such as the following:
Value of Home $200,000
Percentage X 75% (% of appraised value of your home)
- Balance on mortgage $20,000
Potential credit = $130,000
Common Home Equity Questions:
1. How much equity do I need in my home to qualify?
Home Equity Loans are possible regardless of acquired equity, however more equity will almost always garner lower interest rates from your lender.2. Can I take out a home equity loan to finance home improvement?
This is an extremely common practice. Depending on how the money is used you may even be able to deduct some of the interest expenses from your taxes.3. What is a home equity line of credit?
A home equity line of credit differs from a home equity loan in that money can be taken out as needed. If you are financing the construction of a new home, this is often a convenient option to handle expenses as they occur without repeating the loan approval process numerous times.