Home Equity Loans

Use Your Home to Get Cash Out or Consolidate Debt

Simply put, home equity loans are loans in which a person uses the equity in his home as collateral. If you get a home equity loan, you are borrowing against the accrued equity that your home currently has.

A home equity loan is basically the same thing as a second mortgage. It is a new loan which requires separate monthly payments. Qualification requirements for home equity loans often include good payment history on your first mortgage, a decent credit profile for the applicant, and a reasonable loan to value ratio on the home.

Standard Equity Loans vs. HELOC

Standard home equity loans release funds to the borrower in one lump sum, after which regular monthly payments are made to repay the loan. Another type of home equity loan is the home equity line of credit, or HELOC. The HELOC is almost exactly the same as a normal equity loan, except the funds are made available in a revolving account. The pre-established line of credit is available for use when you need it, and you only make payments when you draw from it.

Some of the top reasons that people get home equity loans are:

Debt consolidation - roll high interest debt like credit cards into one loan with a lower interest rate and one easier payment

Home improvements - home renovations or redecorating can be a costly but beneficial investment

Travel/vacation - take the trip of a lifetime without having to wait until retirement

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Home Buying Vocabulary

Prepaids

Necessary to create an escrow account or to adjust the seller's existing escrow account.

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Frequently Asked Question

Will refinancing enable me to terminate my PMI?

Answer:
You may be able to eliminate PMI by refinancing. If, by refinancing, you are able to have at least 20% equity in your home, and you have made your house payments on time for the last year or so.

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