How Do Home Equity Loans Work in VA?

You might be wondering what a home equity loan is and how it works in Virginia. A HELOAN, or home equity loan, is a type of second mortgage that lets homeowners exchange the equity in their home for cash. 

Equity is the difference between the current value of your property and the amount you owe on the mortgage. As a homeowner, making consistent payments over time on the mortgage accumulates equity in your property; therefore, the less you owe on your mortgage, the more equity you have in your home.

HELOANs tap into the equity built up in a home and allow the homeowner to borrow a lump sum of money and repay it through fixed installments by using their home as collateral.

HELOANs use a fixed interest rate to ensure payments are made monthly and consistently through the life of the loan. Home equity loan rates in Virginia are determined by several factors, including the amount of equity available in the home, the borrower’s credit history, and other financial considerations.

Types of Home Equity Loans

Let’s discuss the three main types of home equity loans:

  1. Fixed-rate HELOAN: A fixed-rate home equity loan, provides a one time lump-sum payment from a lender to the borrower/homeowner. With a fixed interest rate for up to 40 years, the lump-sum should be repaid monthly over the lifespan of the loan and must be paid back in full if the home is ever sold.
  2. HELOC: A home equity line of credit works like a credit card. After securing your HELOC rate in Virginia and going through the application process, the lender will provide you with a credit limit you can borrow from as needed each month. HELOC rates in VA are variable, so your monthly payment will change from month to month depending on your current rate and how much credit you used. 
  3. Cash-out refinance: A cash-out refinance allows homeowners to refinance and replace their current mortgage with a larger one. You can pocket the difference between the old mortgage and the new one and use the cash on whatever you’d like. 

Benefits of Virginia Home Equity Loans

The most significant benefit of a Virginia home equity loan is that by paying down the principal balance, you can leverage the equity you have built in your home. A HELOAN can be a solution to many different financial situations and provide other top benefits, such as:

  • Improved cash flow, flexible use of funds, and access to capital for investments.
  • Relatively small monthly payments and lower interest rates compared to high-interest loans.
  • Griffin Funding offers competitive home equity loan rates in Virginia. 
  • Potentially write the interest on home equity loans off on your taxes.
  • Have access to the equity in your home without having to touch your low-rate first mortgage.
  • Use a HELOAN to tap into the equity of a primary residence, second home, or investment property. 

What Makes You Qualify for a Home Equity Loan in Virginia?

There are a few general requirements you must meet in order to qualify for a home equity loan in Virginia:

  • Sufficient home equity: With a home equity loan, you can typically tap into 80 to 95 percent of your existing equity. Lenders require that you retain at least five to 15 percent of your home equity after receiving cash from a HELOAN. 
  • Credit Score: A good credit score shows responsible credit management and timely payments. While a higher credit score will lead to lower HELOAN and HELOC rates in Virginia, lenders will typically require a credit score of at least 640 to qualify. 
  • Stable employment and income: Tax returns, pay stubs, and W-2s verify your income levels and employment status to the lender and endure you can make monthly payment obligations. If you are self-employed or have a more variable income, you can apply for a bank statement HELOAN, which allows you to qualify using 12 or 24 months’ consecutive bank statements as verification. 
  • Debt-to-income (DTI) ratio: This is the metric lenders use to evaluate your gross monthly income against your monthly debt payments to determine if you can afford the new loan. A lower DTI will help you secure better rates and terms on home equity loans in Virginia. 
  • Property type and condition: Lenders are looking for solid investments and so the condition and type of property can influence a lender’s financing decision and may have different requirements for equity. 

Apply for a Home Equity Loan in Virginia

By using your home to your advantage, you can tap into your home’s equity and leverage the value you have built up in your home. Using the cash from a Virginia home equity loan, you can make improvements to increase the value of your property, consolidate high interest debt, and much more. 

Griffin Funding is committed to helping guide you through the application process and find financial solutions based on your unique situation to bring you closer to your aspirations and goals.  Contact us today and let us help find the perfect loan for you or fill out an application online. You can also download the Griffin Gold app to compare your loan options, manage your finances, monitor your credit, and privately search for homes.