Frequently Asked Questions about Home Equity Loans

Here are the answers to the most commonly asked questions about home equity loans.

What are home equity loans?

Home equity loans are secured loans that enable you to convert the wealth you have stored in your home into cash. Home equity refers to the difference between your home’s current appraised value and the remaining balance on your home mortgage. When you take out a loan against your home equity, you take the value of this difference in cash.

Where can I get quotes on home equity loans?

We offer free quotes on home equity loans on our site. All you have to do is complete our online sign-up form, which will ask for things like your name, address, phone number, etc. Once we get this information, we will immediately provide you with at least four quotes on a home equity loan. You’ll be able to compare different loans side by side quickly and easily. By presenting your quotes to you simultaneously, we force our lenders to compete for your business, which means lower rates for you.

How much of my home equity will I be able to borrow?

This will depend on many factors, mainly your credit and your lender. Most lenders will only issue home equity loans for a maximum of 80% of the value of your home equity. However, there are some lenders that extend loans of up to 110% of the value of your home equity. Usually, the better your credit is, the more you will be able to borrow.

How do I figure out how much equity I have in my home?

In order to determine your home equity, you will first need a current accurate appraisal of your home’s value. The best way to do this is to hire an independent appraiser. Once you have a solid figure for your home’s worth, you will then need to subtract from it all outstanding debts against the house. To give an example, if your home is worth $150,000 and you owe $120,000 on your mortgage, your home equity will be $30,000. This is usually the maximum amount you can receive with a home equity loan.

What’s the difference between a home equity loan and a home equity line of credit?

A home equity line of credit (HELOC) works more like a credit card than a traditional loan. A HELOC gives you a predetermined limit that you can then borrow against as you need money. You will have a certain minimum payment that you will have to make each month. Some lenders give you the option of making interest-only payments each month. A HELOC has variable rates that fluctuate with the prime rate. Home equity loans, on the other hand, give you a fixed amount of money all at once, which you then repay over a predetermined period of time. The monthly payment and interest rate of a home equity loan with a fixed rate never change.

What happens if I fall behind on the payments for a home equity loan?

Because home equity loans are secured against your home, you could lose your home if you fall behind on your payments. A home equity loan uses your home as collateral, which means that the bank could repossess your home if you fail to repay the money as agreed.

How is my interest rate determined?

The interest rate of your home equity loan will depend on your credit history, income, how much debt you have, the value of your home, and market conditions. If interest rates are on the rise, you might want to opt for a fixed-rate home equity loan to lock in the current low rate for the life of your loan. If, on the other hand, you expect interest rates to fall, you might consider a HELOC or other adjustable-rate equity loan.