If you are looking at securing some extra funds, be it for a big trip, putting your children through college or even perhaps some home improvements, you can do so buy releasing some of the equity in your home. A home equity loan is a good way for you to get your hands on the extra money that you need, and it gives you the opportunity to do so in a way that is secure and comes with competitive interest rates.
Home equity loans are not always straight forward so we have put together these answers to some of those burning questions which you may have.
What is it?
A home equity loan lets you borrow a fixed amount of money which is then secured by the equity in your home. The money will be received in one lump sum, and they will typically have a fixed interest rate and a fixed monthly payment.
What are the Requirements?
The best way to get an idea as to whether or not you qualify for this type of loan is to speak to a professional advisor. Usually however the basic requirements for this type of loan are that you have a credit score of at least 600, that you have a strong history when it comes to using credit, that you have employment and income which can be verified and also that you actually have some equity in your home.
How Much Can I Borrow?
The amount that you can borrow is heavily dependent on how much equity you have in your home. In order to get a rough estimate as to how much equity you have in the home, you should first get the market value for the home, and then deduct any debts which you have secured against the property. For example if you have a home that is worth $200,000 and you owe $100,000 in mortgage and debts, your equity is $100,000.
Why Get a Home Equity Loan?
There are a great many benefits to obtaining a loan against the equity in your home, rather than looking at other loan options. More often than not you will find that the interest rates on a home equity loan are much lower than say a personal loan, you can also enjoy the potential of some tax savings. Home equity loans are loans which are secured against the home and therefore there is a lot more trust built into the loan itself. In terms of the tax benefits, some home equity loans offer interest payments that are tax deductible, meaning that you can save even more money.
Ultimately you are likely to be paying back a home equity loan over a longer period of time than a personal loan but the overall cost to you will be a great deal cheaper. Be sure that you manage your debt well as your house could be at risk if you don’t.