Alaska Home Equity Loans

A home equity loan works by allowing homeowners to borrow money using the accrued equity in their home as collateral. Home equity is typically calculated as the difference between the home’s current market value and the outstanding mortgage balance. You will generally be able to borrow up to 90% of the home’s equity.

So, for example, if your home is worth $500,000 and $300,000 is still owed on the mortgage, the equity would be $200,000. A well-qualified borrower in this case may be able to take out a home equity loan for up to 90% of the equity, or $180,000. There are virtually zero restrictions on how the money is spent.

Because home equity loan rates in Alaska are locked in and have a set loan term, the payment remains the same until the loan is paid off. Longer contracts (up to 40 years) can offer low, budget-friendly monthly payments.

Though a home equity loan (HELOAN) and a home equity line of credit (HELOC) are both considered second mortgages and allow homeowners to tap into their home’s equity, each have their own unique purpose. It is important to know the differences so you can make an educated decision when choosing a HELOC vs HELOAN:

• Home equity loan: A traditional secured loan, with a fixed interest rate and longer term, that uses a home’s equity as collateral. Best suited for larger purchases/expenses, like college tuition, remodeling, medical bills, or debt consolidation, these loans are issued as one lump sum – most often up to 85%-95% of the home’s equity.
• Home equity line of credit: More similar to a credit card than a traditional loan, a home equity line of credit in Alaska offers a more flexible option for recurring expenses or smaller purchases to be made on-demand. Your limit is set by the home’s equity, and the HELOC rates in Alaska will vary according to market conditions.

Alaska home equity loans are a great option if you know how much you’ll need to borrow and are looking for a simple monthly payment. However, if you’re looking for a more flexible option that allows you to make smaller purchases as needed, a home equity line of credit may be a better solution.

There are many benefits to using your home’s equity to secure a home equity loan in Alaska. But like any form of financing, it pays to educate yourself on the benefits and drawbacks before making a decision.

Here are some of the most common pros and cons of Alaska HELOANs:

Pros:

• Competitive, fixed interest rates and long contract terms, meaning a low and predictable monthly payment.
• No need to alter your home’s existing low-rate mortgage.
• Lump-sum payout gives you the freedom to handle large purchases or expenses quickly.
• Virtually no restrictions on how you choose to spend the funds.
• The interest on your HELOAN may be tax deductible.
• Home renovations you complete may increase your overall property value.

Cons:

• Alaska home equity loans will count toward your total debt burden.
• Though home equity loan rates in Alaska are generally more competitive than credit cards and other high-interest loans, they will likely still be higher than with your first mortgage.
• Because your home equity is being used as collateral, you risk losing your home if you don’t pay back your loan as agreed.

Your credit, income, and home equity will all be taken into consideration when applying for an Alaska HELOAN. Here are some of the basic factors that contribute to getting an approval:

• Equity: You’ll generally need to have at least 15%-20% equity in your home to take out a home equity loan. Also keep in mind that the loan amount typically won’t be any more than 90% of your total home equity.
• Credit: A good credit score is crucial. Try to get your FICO to at least 640 prior to applying. Your debt-to-income ratio (DTI) is also important; a DTI ratio below 43% will give you the best chances at a competitive approval.
• Income: You will need to provide tax returns, pay stubs (proof of employment), and W-2s to show income stability and your ability to repay the loan without overstretching your budget. If you are self-employed, Griffin Funding also offers a bank statement HELOAN in Alaska.

Home equity loans in Alaska continue to be a fantastic alternative to credit cards and personal loans for homeowners. The competitive interest rates, predictable monthly payments, and large lump-sum payouts make them a great option for home improvements and renovations, college tuition, consolidating debt, and more.

When used responsibly, home equity lines of credit in Alaska will offer more flexibility and better rates than many credit cards. They give you the freedom to harness your home’s equity to pay for ongoing expenses as you go without interfering with your existing low-rate mortgage loan.

When working with Griffin Funding as your financing partner, you are working with a team of professionals that specialize in HELOANs and HELOCs in Alaska. Apply now using our quick and easy online application. Or, if you’re still working on your credit or building additional equity, download the Griffin Gold app to stay on top of your credit report and track your finances to get the best chance at approval.