How Does a Home Equity Loan Work in Michigan?

When you apply for a home equity loan in Michigan, you’re using your home as collateral to take out a secured loan. Because you’ve got collateral in case you can’t repay your loan, it’s easier to get access to money you might have a hard time borrowing otherwise.

Given that home equity loan rates in Michigan tend to be low compared to credit cards and personal loans, they can be a smart choice if you’re a homeowner who wants to fund a big expense, whether it’s an unexpected emergency bill or renovations that increase the value of your home. A Michigan home equity loan can also be a good option if you want to consolidate high interest debt. 

Once you have accumulated enough equity in your home, you can apply for a home equity loan. Lenders typically let you borrow up to 95 percent of the equity you have in your home, with some setting the limit at 80 percent. If you haven’t paid your loan off in full by the time you sell your house, the money you owe will come from the house sale.

Applying for a home equity loan in Michigan typically starts with providing essential financial information like proof of income. Tax returns typically serve as proof of income, but you can also apply for a no doc home equity loan through Griffin Funding if you’re self-employed.

Types of Home Equity Loans

Choosing the right loan based on your situation is important. There are two different types of home equity loans — home equity loans (HELOANs) and home equity lines of credit (HELOCs).

A home equity loan is a simple fixed-rate loan. As long as you’ve got enough equity in your home, you can apply for a HELOAN. Your lender will fund your loan in one lump sum payment, and you’ll typically have somewhere between five and 40 years to pay it back. Lenders typically require that you have five to 20 percent equity to get a loan, which allows you to borrow up to 90 percent of your home equity.

A home equity line of credit is a little different from a traditional home equity loan. Lenders will give you a set spending limit based on your home’s value and how much equity you have. You can spend this money like you’d use a credit card, and your monthly payment will be determined by how much you spend that month. HELOC rates in Michigan are also variable, so your interest rate can go up or down based on market conditions.

There’s no wrong answer if you’re deciding between a HELOC and HELOAN. However, it’s important to consider the pros and cons of different types of loans before making a decision.

Pros and Cons of Michigan Home Equity Loans

Before you apply for a home equity loan, you should weigh the benefits versus the potential risks you’re facing. Home equity loans can be an excellent tool if you use them responsibly, but here’s what you should consider first:

Home equity loans offer several benefits, such as:

  • You can get access to cash for home renovations, medical expenses, and more
  • Griffin Funding offers competitive home equity loan rates in Michigan on primary residences, second homes, and investment properties
  • You don’t have to sacrifice your low-rate mortgage
  • Michigan home equity loan rates tend to be low when compared to credit cards and personal loans
  • You can potentially write off home equity loan interest on your taxes 

Cons of home equity loans include:

  • HELOANs and HELOCs add to your overall debt burden
  • A HELOC can lead to reckless spending if you don’t apply with a plan in place
  • Failing to pay back your loan can result in losing your house

There are certainly risks when it comes to Michigan home equity loans, but it’s all about being a responsible borrower. Don’t borrow more than you can afford to repay, and make sure you’re using your money for something you need rather than something you want.

You should also check HELOAN and home equity line of credit rates in Michigan before you apply for a loan. Do your research and stay disciplined and you can get more out of your home equity loan.

Michigan Home Equity Loan Qualification Requirements

Getting approved for a home equity loan is easier than you might think, but there are still criteria you need to meet. Here are the three major requirements lenders look at when you apply for a home equity loan:

  1. You generally need to have at least 20 percent equity in your home to get approved for a loan. Generally, once you’ve received cash from your home equity loan, you must keep at least five to 15 percent equity to qualify. 
  2. Your lender will look at your credit score and debt-to-income ratio to make sure you can repay your loan. A bad credit score can make it difficult to get approved for a loan.
  3. Finally, we consider your mortgage payment history and income. If you’re making enough money to repay your loan and you have a history of on-time mortgage payments, you should be good to go.

If you’re unsure whether you’re eligible for a home equity loan in Michigan, contact our team today to discuss whether you qualify. You can also use the Griffin Gold app to compare loan options, build a budget, monitor your credit, and make sure you’re on track to get approved for a home equity loan.

Apply for a Home Equity Loan in Michigan

Taking out a home equity loan can be a smart alternative to applying for a credit card or personal loan. Comparatively low rates and longer loan periods can make home equity loans easier to pay back.

When it comes to home equity loans, Griffin Funding makes things simple. You can apply for a home equity loan on our website or contact us to learn more about our loan options. If you’re ready to tap into your home’s equity, apply for a Michigan home equity loan with Griffin Funding today.