How Does a Home Equity Loan Work in New Mexico?

New Mexico home equity loans allow you to take out a secured loan and use your home as collateral. Essentially, you’re exchanging the home equity you’ve accumulated for cash. Once you have your money, you can use it for anything from fixing up your house to paying for college or medical expenses.

Because home equity loans are secured loans, home equity loan rates in New Mexico are relatively low compared to credit cards and personal loans. This makes a home equity loan a good option when it comes to consolidating high interest debt.

If you’re approved for a home equity loan, lenders will generally allow you to borrow as much as 95 percent of the equity you have in your home. You can choose to receive your money in a single lump sum payment, or you can open a line of credit to make purchases. 

In most cases, we ask for your tax returns when you apply for a home equity loan in New Mexico. However, we also offer a bank statement HELOAN option for self-employed individuals.

Types of Home Equity Loans

It’s important to understand how a home equity loan works before you fill out an application. There are different types of home equity loans, each offering unique loan terms and pros and cons. Here’s what you need to know.

A home equity loan (HELOAN) is perhaps the most straightforward way to tap into your home equity. When you get approved for a home equity loan, you receive your money in a single lump sum with a set loan term. Home equity loan rates in New Mexico are fixed, so your monthly payment will be the same amount for the duration of your loan. You typically have between five and 40 years to pay your loan off in full.

On the other hand, a home equity line of credit (HELOC) is a secured line of credit that uses your home’s equity as collateral. Your lender will give you a spending limit based on the value of your home and your equity, and you’ll make monthly payments based on how much you spend. HELOC rates in New Mexico are variable, so your monthly payments will depend on your current rate and how much credit you use in a given month. 

Both HELOANs and HELOCs have their benefits, but they’re very different. If you need all your money at once, a HELOAN may be a better choice.

Pros and Cons of New Mexico Home Equity Loans

If you’re looking for a quick way to access cash flow, you might be considering a home equity loan in Albuquerque. However, there are some pros and cons you should know about before you apply for a loan.

Pros of home equity loans include:

  • You can get access to a significant amount of cash for larger projects and expenses
  • Griffin Funding offers competitive interest rates
  • You don’t have to sacrifice your low-rate first mortgage
  • You can use your loan for anything from medical expenses to renovating your house
  • HELOANs allow you to tap into the equity on a primary residence, second home, or investment property 
  • You can potentially write off home equity loan interest on your taxes 

There are also downsides to home equity loans, including:

  • Home equity loans add to your total debt burden
  • Failure to repay a home equity loan can lead to losing your home
  • You need to be cautious about overspending with HELOCs

For the most part, the downsides of home equity loans can be avoided as long as you’re responsible. If you’re planning on taking out a home equity loan in New Mexico, only borrow what you need and make sure you pay it back on time.

New Mexico Home Equity Loan Qualification Requirements

You might be wondering if you can qualify for a New Mexico home equity loan. While having equity in a home is the biggest requirement, there are other criteria you need to meet to secure a home equity loan:

  1. You need to have a minimum amount of equity in your home to qualify for a loan. Depending on the lender, you generally need to have at least 15 to 20 percent equity in your home to borrow against it. After receiving cash from a HELOAN, you should still have at least five to 15 percent equity in your home. 
  2. Your credit score and debt-to-income ratio are used to determine your creditworthiness, so check your credit report before you apply. You may need to pay down some of your debt before applying for a loan.
  3. Missed mortgage payments and inadequate income can lead to your application being denied. Make sure you’re making on-time payments and prepare proof of income in the form of tax returns or bank statements if you want to get approved for a HELOAN.

If you’re concerned about your credit score or total debt, you can use the Griffin Gold app to monitor your credit, manage your finances, and make sure you’re in good financial standing before you apply for a home equity loan.

Apply for a Home Equity Loan in New Mexico

Home equity loans can be an excellent resource for homeowners who want to cash in on their home’s equity. As long as you’ve got enough equity in your home, you can tap into that equity to get the funds you need for just about anything.

At Griffin Funding, we’re happy to answer any questions you might have before applying for a loan. We also make it easy to get started with a simple online application. Contact us or apply online to see if you qualify for a home equity loan today.