What You Need to Know About Home Equity Loans
For today's homeowners, one of the greatest benefits of homeownership is the home equity you build up over time. The gradually expanding value of a home is a financial resource that can gain momentum over time. Building equity can be a long-term strategy for growing wealth, but it's also a great resource when you need a little extra cash for financial endeavors or any home improvements you're needing to complete. Let's take a look at what a home equity loan is and some of the benefits for qualified recipients.
What is a Home Equity Loan?
A home equity loan is a type of second mortgage. Your “first” mortgage is the one you used to purchase your home, but you can use additional loans to borrow against the property if you have built up enough equity. Home equity loans allow you to borrow against your home’s value. They provide access to large amounts of money, and they can be easier to qualify for than other types of loans because they are secured by your house.
Benefits of Home Equity Loans
Home equity loans are attractive to borrowers because of the key benefits they offer:
What is a Home Equity Loan?
A home equity loan is a type of second mortgage. Your “first” mortgage is the one you used to purchase your home, but you can use additional loans to borrow against the property if you have built up enough equity. Home equity loans allow you to borrow against your home’s value. They provide access to large amounts of money, and they can be easier to qualify for than other types of loans because they are secured by your house.
Benefits of Home Equity Loans
Home equity loans are attractive to borrowers because of the key benefits they offer:
- Low Rates: Home equity loans typically have a lower interest rate (usually quoted as APR) than unsecured loans such as credit cards and personal loans. A low rate can help keep borrowing costs low, but closing costs may offset low rates.
- Approval: Home equity loans may be easier to qualify for if you have bad credit. With your home securing the loan, lenders have a way to manage their risk. That said, mortgage loans often require extensive documentation, and lenders set minimum requirements that may make it hard to borrow—even if you have significant equity.
- Large Amounts: Borrowers can qualify for relatively large loans with this type of loan, assuming you have sufficient equity in the home. For large expenses like home improvements, higher education, or starting a business, your home equity may be the only source of funding available.
- Potential Tax Benefits: You may be able to deduct some of the interest you pay on a home equity loan, particularly if you use the funds for "substantial improvements" to a property. Ask your tax preparer for details before you borrow and before you claim a deduction.
How a Home Equity Loan Works
When you borrow with a home equity loan, your lender may offer a couple of options. You can take a large sum of cash up front, and repay the loan over time with fixed monthly payments. Your interest rate can be set when you borrow and remain fixed for the life of your loan. Or you can open a line of credit that provides you with approval for a maximum loan amount, but you only borrow what you need when you need it. This option allows you to borrow multiple times after you get approved. In the early years, you can make smaller payments, but at some point, you have to start making fully amortizing payments that eliminate the loan.
YOUR TRUSTED MORTGAGE LENDER AT THE LAKE OF THE OZARKS
YOUR TRUSTED MORTGAGE LENDER AT THE LAKE OF THE OZARKS
At MHQ - Mortgage HeadQuarters, we find home equity loans to be a great source of funding for our clients. We can share our knowledge and experience with home equity loans, making it easier to get you on track with your financial or home improvement endeavors. So, if you're in need of a home equity loan, trust in the mortgage professionals at MHQ - Mortgage HeadQuarters to have your best interest in mind. We can help you choose a mortgage program that's right for you and your specific needs!
Comments
Post a Comment