How Does a Home Equity Loan Work in Maryland?

A home equity loan allows you to use the equity in your home as collateral when you take out a loan. With your home equity as collateral, you can access larger loan amounts at reasonable interest rates. You can use money from a home equity loan to pay for things like home renovations, medical expenses, college tuition, and more.

Because home equity loan rates in Maryland are typically lower than credit cards and personal loans, home equity loans can serve as a good alternative in some cases. Home equity loans are especially beneficial for those who want to consolidate their high interest debt and unite all of their debt under one payment. 

When you’re approved for a home equity loan, you can usually borrow up to 95 percent of the equity in your home. You’ll receive your loan in a lump sum with a set loan term that typically ranges from five to 40 years. If you decide to sell your home before you’ve repaid your loan in full, the loan will be repaid using money from the sale.

Generally speaking, you need to provide W-2s and tax returns to apply for a home equity loan in Maryland. However, we offer a no doc home equity loan if you’re self-employed or have non-traditional sources of income.

Types of Home Equity Loans

Part of understanding how a home equity loan works is learning about the different types of loans. You can choose between a standard home equity loan (HELOAN) and a home equity line of credit (HELOC).

Home equity loans are just like any other loan, but they’re secured by your home’s equity. When you take out a HELOAN, you’ll receive your money in a single lump sum with a fixed interest rate. Thus, your monthly payments will be a consistent amount until you’ve repaid your loan. 

A home equity line of credit is a line of credit you can start using your home as collateral. Your lender will give you a spending limit based on your home’s value and how much equity you have. Each month, you’ll need to make a payment based on how much you spent. Because HELOCs are adjustable-rate loans and your spending can vary, your monthly payment will change each month.

Both types of home equity loans have benefits and drawbacks. Consider comparing HELOAN and HELOC rates in Maryland before applying for a loan — and keep in mind that home equity line of credit rates in Maryland are always changing.

Pros and Cons of Maryland Home Equity Loans

Before you apply for a home equity loan in Maryland, you need to know what you’re getting into. Home equity loans can be great when used responsibly, but there are some pros and cons you should know about.

Benefits of home equity loans include:

  • You can use home equity loans to boost cash flow 
  • Griffin Funding offers competitive rates on home equity loans on primary, second, and investment homes
  • Home equity loans tend to have lower rates than credit cards and personal loans
  • You don’t have to get rid of your low-rate first mortgage
  • You can use the funds from a home equity loan for whatever you want

There are also downsides to home equity loans:

  • HELOCs can lead to overspending if you don’t implement a financial plan 
  • You can lose your home if you’re not able to repay your loan
  • Home equity loans can add to your debt burden 

You shouldn’t avoid home equity loans, but you should know the risks before you commit to anything. As long as you use home equity loans responsibly and repay them on time, they can be an excellent option when it comes to obtaining extra funds or consolidating existing debts. 

Maryland Home Equity Loan Qualification Requirements

Applying for a home equity loan is relatively easy, but there are requirements you have to meet. Here’s what lenders look at when reviewing your Maryland home equity loan application:

  1. Most lenders require borrowers to have a minimum of 15 or 20 percent equity in their home. 20 percent is more common, but you may be able to secure a loan with 15 percent equity. Ultimately, you’ll need to hold on to at least five to 15 percent equity in your home after getting the cash from a HELOAN. 
  2. Lenders also look at your credit score and debt-to-credit ratio to make sure you’re able to repay your loan on time. A bad credit score or high DTI can keep you from qualifying for a home equity loan or negatively impact the rate and terms you’re eligible for.
  3. We also look at your mortgage payment history and income. As long as you have a history of making on-time mortgage payments and your income is adequate, you can get approved for a home equity loan in Maryland.

Getting approved for a home equity loan isn’t rocket science, but that doesn’t mean there are no requirements. You can use the Griffin Gold app to monitor your credit score, create a budget, and optimize your finances while preparing to apply for financing. The Griffin Gold app also allows you to explore different financing options and get personalized support if you have questions about any of your mortgage options.

Apply for a Home Equity Loan in Maryland

Maryland home equity loans offer several benefits, including competitive interest rates and more time to repay your loan. As long as you use your loan responsibly and pay it off within the loan period, a home equity loan may be a smart alternative to a personal loan or credit card.

If you want to leverage your home’s equity and get access to cash flow, Griffin Funding can help. Applying for a home equity loan with Griffin Funding is as simple as filling out an online application. Fill out our online application or contact us today to find out if you qualify for a home equity loan.