Home Equity Loans & Lines of Credit
Looking to tap into your home’s equity? Understanding the various types of home equity products available can help you make the right financial decision for your needs. Home equity loans and home equity lines of credit allow existing homeowners to borrow against the equity they’ve built in their property, often at competitive rates compared to other borrowing methods.
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Types of Home Equity Products
Home equity programs are available in several types, each with unique features and benefits. Home equity interest rates vary by loan type, so it’s important to understand what each option entails before making a commitment. Click the links below to learn about each type of home equity loan Griffin Funding offers, understand the pros and cons of each, and perform your own home equity loan comparison.
Home Equity Loan
A traditional home equity loan provides a lump-sum payment that you’ll repay over a fixed term with consistent monthly payments. This option works well for one-time expenses like home renovations or debt consolidation since you’ll receive all funds upfront and benefit from predictable payments with fixed interest rates.
Home Equity Line of Credit
Unlike a lump sum, a home equity line of credit (HELOC) is like a credit card but comes with much lower interest rates in comparison. As a revolving line of credit, a HELOC lets you pull funds as needed during a predetermined draw period. This flexibility makes HELOCs ideal for ongoing expenses or projects with unpredictable costs, though they typically come with variable interest rates, so they can change over time depending on market conditions.
Fixed-Rate HELOC
A fixed-rate HELOC can give you the best of both worlds by combining the flexibility of a traditional HELOC with the predictability of fixed interest rates. This hybrid option allows you to lock in home equity rates on portions of your borrowed amount while maintaining access to your credit line, giving you both stability and flexibility in managing your home equity borrowing.
DSCR Home Equity Loan
For investment property owners, a DSCR home equity loan offers funding based on the property’s income rather than your personal income. This makes it an excellent choice for real estate investors who want to leverage equity in their rental properties without the traditional income verification process.
Bank Statement Home Equity Loan and Line of Credit
Self-employed individuals or those with seasonal or non-traditional income sources can benefit from bank statement home equity loans and lines of credit. These loans use bank statements rather than tax returns and pay stubs to verify income, making them accessible to entrepreneurs, freelancers, and business owners who might not be able to qualify for conventional loans due to complex tax situations. Access a lump sum with a bank statement home equity loan or set up a line of credit for ongoing expenses with a bank statement HELOC.
Reverse Mortgage
Seniors aged 62 and older may consider a reverse mortgage to turn home equity into cash without monthly payments. This mortgage loan is repaid when you sell your home, move out, or pass away. This option provides supplemental retirement income while allowing homeowners to remain in their homes.
Reverse Second Mortgage
A reverse second mortgage offers an alternative for seniors who already have an existing mortgage. This option allows homeowners to access their equity without disturbing their primary mortgage, providing additional retirement funds while maintaining their current mortgage arrangement.
Explore Your Home Equity Loan Options
When comparing home equity loan options, consider your financial goals, comfort with variable interest rates, and how long you plan to stay in your home. Before deciding, review current home equity loan rates and consider consulting with a mortgage professional. Our team can help you understand how a home equity loan works and the different types of home equity loans so you can find the solution that best fits your financial situation. You can even track your application and manage documents easily through the Griffin Gold app.
Home equity programs can be used on just about any home equity whether it is a primary residence, second home, or investment property.
As a rule of thumb, most home equity loans require a traditional interior/exterior appraisal performed by a licensed appraiser, while most home equity lines of credit do not. As a leading HELOC lender, we use an Automated Valuation Model (AVM) and a Property Condition Report (PCR) to establish your home’s value, saving you time and money. If the AVM is able to deliver the desired confidence score, then the appraisal is waived.
Reach out to Griffin Funding today and explore the different ways to tap into your home equity!
Frequently Asked Questions
The right home equity loan depends on your specific financial needs and circumstances. If you need a lump sum for a one-time expense, a traditional home equity loan might be best. For ongoing projects or expenses, a HELOC offers more flexibility.
Self-employed borrowers might prefer bank statement home equity loans, while investors could benefit from DSCR loans. Consider how you’ll use the funds, your comfort with variable vs. fixed interest rates, and your long-term financial plans.
Yes, you can get a HELOC without a first mortgage. This is known as a first-lien HELOC, and it allows homeowners who own their property free and clear—or who have paid off their first mortgage—to tap into their home equity.
A first-lien HELOC works just like a traditional home equity line of credit, but instead of sitting behind a first mortgage, it becomes the primary lien on the property. These HELOCs offer flexible access to funds, typically with interest-only payments during the draw period and a variable interest rate tied to the WSJ Prime Rate.
Yes, you can qualify using a non-QM bank statement loan based on your deposits rather than your tax returns or you can go the traditional route and provide tax returns. Ultimately, it’s your choice.
Yes, if you have enough equity in your investment properties, you can access it with a non-qm DSCR home equity loan based on the rental income of the property rather than your tax returns. You can also attempt to qualify using traditional income qualification methods—we can help you decide which is better.
Securing favorable home equity interest rates typically requires a good credit score, significant equity in your home (at least 10%-20%), a low debt-to-income ratio, and stable income.
Understanding home equity loan limits is also important, as these can vary by lender and location and depend on how much equity you currently have in your home. Shopping around with multiple lenders can help you find competitive rates, and some lenders offer discounts for existing customer relationships.
Consider getting rate quotes from at least three different lenders to ensure you get the best deal.
Choosing between a home equity loan and a home equity line of credit depends on your borrowing needs. There is no difference between a second mortgage vs. a home equity loan, as a home equity loan or HELOC is how you tap into your existing equity via a second mortgage.
A HELOAN is typically better if you need a specific amount for a one-time project, expense, or debt consolidation and prefer predictable, fixed payments. A HELOC works better for ongoing expenses or projects with uncertain costs, offering the flexibility to borrow only what you need when you need it. Consider your comfort with variable rates (HELOC) versus fixed rates (HELOAN) and whether you prefer the security of fixed payments or the flexibility of drawing funds as needed.
Want to explore your home equity line of credit options? See your offers in 90 seconds and determine whether a HELOC is the right option for you!