Owning a home is great! When you own your home, you also build home equity over time as you pay more towards your mortgage even before it is paid in completion. Your home equity is like a timed savings fund that you can tap into once it reaches a certain percentage or value.
How to Know When You Can Use Your Home Equity?
Your home equity is the value that you own in your home if your mortgage is still ongoing. You can estimate it by taking away all debts from the current market value of your home. For example, you have a home that is worth $900,000 on the market if you were selling right now, and you still owe $135,000 on it. That means that your home equity is $765,000. The bigger your home equity is, the more that it proves how responsible you are with payments and so it can allow you to qualify for various home equity loans.
Why Use Your Home Equity to Secure A Loan?
Using your home equity to secure a loan is a smart way to increase your chances of getting approved plus save a lot on interest. Because using your home equity for a loan makes that loan a secured loan, you will enjoy lower interest rates as compared to non-secured loans. Oftentimes, a secured loan also means that you can borrow more, therefore giving you more flexibility and freedom for the uses of your funds.
Should You Get A HELOC or A Home Equity Line of Credit?
If you prefer a revolving line of credit as a way to access your home equity, then a HELOC could be the option you’ll want to go for. A HELOC will let you repay and reuse the amount available in its line of credit until the end of its term. The ceiling amount of the credit line is typically 60-80% of the home’s lending value so it is a significant amount. Another good thing about a HELOC is that you will only pay for the interest of the amount you used plus the fees that are stated in your agreement with your lender at the end of the term. The downside of this is that there will be months wherein you will have a bill and months wherein you may have none which can be confusing for some people.
Should You Get A Second Mortgage?
A second mortgage is the home equity loan option for you if you prefer to get cash in a lump sum for a one-time big expense. Because the funds are fully given to you at the start of this loan, the payment that you need to make each month is a fixed rate as everything has been computed and agreed upon beforehand. This home loan gives you no surprise bills and can make it easier for you to plan ahead.
Have you decided to access your home equity by applying for a home equity loan? Contact us at Homebase Mortgages to send an application as soon as possible. Your application will be processed and approved in as little as 24 hours!