What Is a Home Equity Loan?
A home equity loan (HELOAN) is a loan that you can collateralize using the equity in your house. If you have been in your house for a while, you have probably built up a significant amount of equity. Therefore, you can use a home equity mortgage, borrowing against the equity that you have in your house.
Because a loan from home equity is collateralized against your house, it generally comes with an interest rate that is comparable to a first mortgage. Thus, when compared to other types of personal loans, business loans, and credit cards, a home equity loan can be a more affordable option.
How Does a Home Equity Mortgage Work?
If you are interested in taking out a home equity loan, the first step is to take a look at how much equity you have in your house. Even though every lender is different, you will generally be allowed to borrow up to 90% of the equity you have in your house. Then, you can use that money for whatever purpose you would like.
You are required to pay the principal and interest on your home equity loan every month for the fixed term of the loan. The only requirement is that you need to pay off the balance of your home equity loan before you decide to sell your house. If you have not paid off your home equity loan when you sell the house, the proceeds from the sale of the house will be used to pay off your home equity loan before you receive the rest of the cash.
With this type of HELOAN you will be required to show your W2s and tax returns in order to qualify. You must provide full documentation to demonstrate your ability to repay. If you are self-employed we have a bank statement HELOAN 2nd that you may want to apply for.
Home Equity Loan Benefits
Some of the top benefits of a home equity loan include:
- You can access capital and improve cash flow.
- Griffin Funding’s home equity loans boast competitive interest rates.
- The monthly payment can be relatively small, compared to other high-interest loans
- You may be able to write off the interest on a home equity mortgage as a tax deduction.
- You can use it to renovate your home
- You don’t have to touch your low-rate first mortgage to access the equity in your home.
Home Equity Loan Drawbacks
On the other hand, there are a few drawbacks of home equity loans that you should keep in mind as well. They include:
- You can increase your debt burden.
- Interest rates on home equity loans are typically higher than rates for a traditional first mortgage.
- Failure to pay back a home equity loan can result in the loss of your house.
As you can see, home equity loans offer significant benefits, as well as some noteworthy risks. Think carefully about the benefits and drawbacks before you make a decision.
How to Get a Home Equity Loan
If you are interested in qualifying for a home equity loan, the application will be similar to applying for a traditional loan, such as a fixed-rate mortgage. To get a home equity loan, follow these steps:
- Reach out to our team to talk to us about the loan options we have available. We will direct you to an online application that you can fill out.
- We will ask for different types of paperwork as a part of the application process. You should submit the paperwork to us, and we will review it for you.
- We will reach out to you if we have any questions or concerns about your application, or if we need more information.
- We will let you know if you have been approved for a home equity loan and what the limit of the home equity loan is. We will also provide you with an interest rate attached to the loan.
- If you decide to accept our terms, we will invite you to sign the loan document in the presence of a notary.
We have made our process as easy as possible. We do not require a credit check for a quote, and we do not require as much documentation as other lenders. Our online loan application is straightforward and can often be completed in under 15 minutes.
See If You Qualify for a Home Equity Loan
Regardless of whether you are looking for Non-QM loans, asset-based loans, or a home equity loan, it would be our pleasure to help you. We are Griffin Funding, and we have worked hard to diversify the loan options that we have available. That is why we can even provide you with help regarding VA loans and Bank Statement loans.
It would be our pleasure to talk with you about a home equity loan and how you can use it to cover your expenses. Give us a call today to learn more about the options we have available, and be sure to ask us for a free quote.
Frequently Asked Questions
How can I pull equity out of my home?
If you own your house, and you have equity built up in your home, you can borrow against the equity. Financing products such as a cashout refinance or home equity loans allow you to use the equity in your home as collateral for a loan, providing you with the cash you need to make home improvements, consolidate debts, and so on.
Is using a home equity loan a good idea?
Using a home equity loan can be a good idea as long as you use it responsibly. Oftentimes, homeowners use home equity loans to add to the value of their home by making repairs or undertaking remodels. Home equity loans that are used frivolously can increase one’s debt burden for no good reason. Reach out to Griffin Funding and speak with one of our advisors to learn whether a loan from home equity is right for you.
What is the difference between a HELOAN and a HELOC?
For a full explanation of the difference between a Home Equity Loan and a Home Equity Line of Credit please visit on blog post titled HELOC vs Home Equity Loan Explained.