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Applying for a Home Equity Loan? Here Are Things to Watch Out For

Applying for a home equity loan may or may not be easy based on a number of things. As home equity loans are becoming more popular these days, more people are getting interested in acquiring one and hence they might make mistakes because of trying to get it as soon as possible. One thing to know about a home equity loan is that it\’s a type of second mortgage that allows people to access a lump sum of money from their home equity without having to sell their home. This money can then be used to spend for investments, higher education, home renovation, or perhaps debt consolidation.

Why Get a Home Equity Loan?

There are many good reasons why people get a home equity loan. Compared to other types of loans, it is one of the easiest ways to get a huge amount of money. Because the homeowner uses their home equity as collateral for this home loan, it is usually approved faster. Some people may also want to get a home equity loan because it features a lower interest compared to other loans considering that it is a secured type of loan after all.

Should You Get a Home Equity Loan or a HELOC?

It should be noted that a HELOC and a home equity loan are two different types of home loan products. Yes, they do sound alike; but they are very different, especially in the way that the funds are accessed by the homeowner. For example, with a HELOC, the homeowner gets access to a line of credit with which they have the freedom to use as little or as much as they want. They may keep using the line of credit until the end of the loan’s term. It is very different from a home equity loan wherein money is given as a lump sum and is only a one-time occurrence. The homeowner needs to pay the home equity loan before they can get another one. Repayment for a home equity loan is a fixed amount per month whereas, with a HELOC, the repayment is usually based on how much of the credit line was used. Both can work depending on what you need. It is best to consult with a mortgage professional to help you weigh the pros and cons of each one better.

Steps to Get a Home Equity Loan

Arming yourself with information is the first step to getting a home equity loan. To be on the safe side, you should inquire from several lenders to compare their costs, interest rates, and other possible loan-related estimates. It is better to consult with mortgage professionals to make this process a lot easier.

At Homebase Mortgages, we match you with a lender that meets your needs after we have assessed some information in your application. We require some important documents but generally, we could give an answer within a day. Note that it could take several days if you have not yet prepared the requirements that will be needed such as an appraisal of your property. Contact us today if you want to apply for a home equity loan in 2022.

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