Iowa Home Equity Loans

If tapping into your home’s equity is sounding like a good option, it’s important to first learn how a home equity loan works.

As you make your monthly mortgage payments year after year, you are slowly building equity in your home. Essentially, you are owning more of it and owing less. After a while, you will have accrued significant equity which can in turn be used as collateral to take out a new secured loan. This second loan will be separate from your first Iowa mortgage, allowing you to retain that low fixed rate and monthly payment on the original loan.

Your equity is calculated simply by subtracting any existing mortgage amount from the current market value of the home. A typical, well-qualified borrower can get approved for up to 90% of the home’s equity.

Iowa home equity loan rates are very competitive and are available as fixed-rate contracts that can extend as long as 40 years, which makes for a low, predictable monthly payment for the life of the loan.

The dilemma of choosing between a HELOC vs HELOAN can be daunting at first. However, a basic understanding of how they work – and how you intend to use the funds – will make for a much easier decision that best fits your unique needs:

• Home equity loan: A home equity loan in Iowa is very similar to a traditional personal loan, with the major difference being that your home equity is the collateral. Once the loan is approved, your cash is disbursed in a single lump-sum payment. The maximum loan amount is generally as high as 90% of your total equity. This structure has the option of a fixed rate, which means a fixed monthly payment and a long repayment term of up to 40 years.

• Home equity line of credit: Similar to a credit card, a home equity line of credit provides a credit limit that is largely determined by how much equity you have in your home. You can draw from these reserves as you need, which gives great flexibility and the option to pay down your revolving balance as you go. You pay interest only on the amounts you borrow, however the rates do fluctuate with varying market conditions. HELOC rates in Iowa are usually lower than standard credit card rates, which can make them a good alternative if you need a revolving line of credit to fund renovations, home improvement projects, and more.

The best way to decide between these two options is to consider your intended use of funds. Are you making a single, intentional purchase that you’d like to slowly pay off over time? Then a HELOAN would be a fantastic option. If you’re looking for a flexible spending solution that offers a high credit limit, reasonable interest rates, and funds that can be tapped into as needed over a longer period of time, then a HELOC is probably a smart choice.

Deciding to tap into your equity offers many benefits to Iowa homeowners that make it a great alternative to personal loans. But like any form of financing, there are potential downsides as well. Here are some of the most important points to keep in mind when deciding:

Pros:

• Competitive fixed rates, terms of up to 40 years, and predictable monthly payments make HELOANS easy to budget for.
• Disbursement is received as a single lump sum, meaning you can quickly use the funds to make large purchases.
• There are virtually no limits on how you can use the funds you receive from a home equity loan.
• Utilizing a home equity loan in Iowa will not alter your first mortgage, meaning you can keep your original low fixed rate and monthly payment.
• The interest you pay on your Iowa HELOAN may be tax deductible.

Cons:

• Though home equity loan rates in Iowa are competitive, the rate you pay will likely be higher than your primary mortgage.
• HELOANs will count toward your total debt burden.
• You are leveraging your home equity as collateral, so you risk foreclosure if you default on the loan.

Your home’s equity isn’t the only metric by which lenders consider a HELOAN approval. Here are some of the key aspects to consider prior to applying:

• Credit: A minimum FICO of 640 is necessary to apply, and higher is always better. Solid payment history and responsible borrowing is also very important. Your debt-to-income (DTI) ratio should be no higher than 42% for the best chance at securing an approval. You can download the Griffin Gold app today and begin monitoring your personal credit and learn more about building a successful HELOAN application.

• Income: To prove your ability to repay the loan without severely impacting your budget, you will need to provide proof of steady employment and reliable income. Tax returns, W-2s, pay stubs, and other documents may be requested. For those who are self-employed, Griffin Funding is proud to offer a bank statement home equity loan that can qualify your income based on cash reserves instead of the usual pay stubs.

• Equity: Lenders will typically want to see that you’ve accrued at least 15-20% equity in your home. The amount you are approved for will ensure that you still retain at least 5-15% equity after funds are disbursed.

An Iowa home equity loan is a great alternative to personal loans for homeowners who want to make large purchases or consolidate debt into a single monthly payment at a competitive rate. Griffin Funding is proud to specialize in Iowa HELOANs, and offers competitive fixed-rate options and long repayment terms.

Apply now using our quick online application, and you’ll be connected with a knowledgeable loan agent who can answer your questions and walk you through the process to set you up for success.