If you want to pay off debts, send your children to college or fund your retirement, home equity loans may be right for you. It’s one of the easier lines of credit to get, since you’re using your home to secure the loan. You can borrow up to 75% of the value of your home and you’ll also be able to spend it on what you need to. There are fewer restrictions on these, but you’ll still need a mortgage broker to help you through the process. Here we’re going to go over the benefits and disadvantages of home equity loans so you know if it’s right for you.
How Do Home Equity Loans Work?
A home equity line of credit pulls from the equity, or value, of your home. Instead of a traditional loan where you use your credit as leverage to get the money you need, you’re using your home. You can borrow against your home minus the existing mortgage amount or other liens against your home. You can get these from traditional lenders like banks and private mortgage sources like brokerages and private investors.
You’ll need a mortgage broker to help you get the lowest introductory rate and best terms for your home equity loan. Once you’ve been approved you can draw from it like you would a credit card, or you may receive a lump sum. It’s all about who lends you the money. You will only owe interest and make payments on money you actually use, as opposed to second mortgages.
Why Home Equity Loans Work
If you need to make repairs to your home, send your children to college or even repay your debts, you’ll be able to. Unlike other loans you won’t’ have to pay back huge amounts and you’ll only pay for what you borrow. You don’t even have to take out the max value on your home. You decide how much you borrow, how you repay your loan and best of all what you spend it on.
What’s Bad About Home Equity Loans?
They’re easy to get for a good reason; if you can’t repay the original loan plus interest you may lose your home. It’s a tough position to be in, but with a mortgage broker you’re going to get the best terms and you’ll understand the contract before you enter it. Being educated before you get started with a home equity loan will save you a lot of pain down the road.
So is a home equity line of credit right for you? Everyone is different and if you want to know you’re going to have to talk to a professional to learn more. There are so many things like credit, home value, how much you’ve borrowed against the home in the past and more that will effect what type of terms you can get for your line of credit.
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