How Does a Home Equity Loan Work in North Carolina?

Home equity loans are secured loans that are backed by the equity you have in your home. You may qualify for a home equity loan even if you can’t get a personal loan. You can use the money you borrow for anything, whether you want to fix up your home or cover emergency medical expenses.

Home equity loan rates in NC are typically lower than credit card and personal loan rates. If you need funds for a project or emergency expense, a home equity loan can be the answer when it comes to funding it. Additionally, these comparably low interest rates make home equity loans a good option for consolidating high interest debt. 

Once you apply for a home equity loan, your lender will share the terms of the loan if you’re approved. Most lenders will allow you to borrow between 80 and 95 percent of the equity you have in your home. You can choose to open a line of credit or receive your money in a lump sum. Generally speaking, you have somewhere between five and 40 years to repay your loan. If you sell your home before paying off your loan, a portion of the proceeds will be used to pay your loan.

Applying for a home equity loan is simple, but you usually need tax returns to prove income. However, we offer a bank statement home equity loan if you can’t provide W-2s for any reason.

Types of Home Equity Loans

When you apply for a home equity loan, you can choose between a traditional home equity loan (HELOAN) and a home equity line of credit (HELOC). Weigh your options before deciding which loan is right for you.

A home equity loan is a loan that uses your home’s equity as collateral. When you’re approved, you’ll receive your money in a single payment. Your lender will also specify a loan term, which is how much time you have to repay your loan. Home equity loan rates in Charlotte, NC (and other cities throughout the state) are fixed, so you can expect to pay the same amount each month.

A home equity line of credit, on the other hand, functions like a credit card. With a HELOC, lenders decide on a spending limit based on how much your home is worth and how much equity you have. Your monthly payment will vary depending on how much you spend. HELOC rates in NC are also variable, which means your monthly payment can fluctuate based on interest rates and how much you spend in a given month. 

If you’re considering applying for a loan, consider current HELOC rates in Charlotte, NC or whatever city you own a home in. You may also want to opt for a HELOAN if you need a large sum of money all at once.

Pros and Cons of North Carolina Home Equity Loans

Understanding the pros and cons is part of understanding how a home equity loan works. Home equity loans are great if you use them responsibly, but you can put yourself at risk if you don’t know what you’re committing to.

Some pros of home equity loans include:

  • You can get access to large sums of cash
  • Griffin Funding offers competitive rates on home equity loans
  • You can spend your HELOAN money on anything you’d like
  • You won’t lose your low-rate first mortgage
  • Interest on home equity loans may be tax deductible 
  • HELOANs allow you to pull equity out of primary residences, vacation homes, and investment properties 

There are also several downsides of home equity loans, including:

  • Taking out a home equity loan adds to your debt burden
  • You can lose your home if you don’t repay your loan
  • You run the risk of overspending if you open a HELOC without a financial plan in place

There are certainly downsides to home equity loans, but they can be avoided if you’re responsible. If you take out a home equity loan in North Carolina, make sure you’re not borrowing more than you can repay.

North Carolina Home Equity Loan Qualification Requirements

Getting approved for a home equity loan is simple as long as you meet a few basic requirements. Let’s take a look at the criteria lenders use when reviewing your home equity loan application:

  1. Most lenders require that you have at least 20 percent in equity before you can get approved for a loan, but some borrowers will allow 15 percent equity. Ultimately, you’ll need to hold on to between five and 15 percent of your home equity after receiving your HELOAN funds. 
  2. Lenders look at your credit score and debt-to-income ratio to make sure you’re not taking on more than you can handle. It’s a good idea to optimize your credit score and lower your DTI before applying for a HELOAN. 
  3. Your mortgage payment history and income are also key factors. Lenders want to see that you make enough money to repay your loan and have a history of making on-time payments.

You may be able to qualify for a home equity loan even if you can’t get a personal loan. However, you still need a good credit score and debt-to-income ratio. If you’re preparing to apply for financing, you can use the Griffin Gold app to monitor your credit, create a budget, and take control of your finances.

Apply for a Home Equity Loan in North Carolina

If you’re looking for a flexible loan that you can use for anything, home equity loans are an excellent choice. You can take out a home equity loan in North Carolina to renovate your home, cover bills from a medical emergency, or help your children with college expenses.

At Griffin Funding, we’re committed to empowering you as a borrower. Online applications make it easy to apply for loans, and we’re here to help if you have any questions or concerns. If you’re thinking about applying for a home equity loan in North Carolina, contact us or fill out an application online.