Washington, DC Home Equity Loans

If a Washington, DC home equity loan sounds interesting, then it’s important to learn how a home equity loan works:

As you slowly pay off your mortgage each month, you accrue equity in your home. After a while, you can use this accrued equity as collateral to take out a secured loan. This home equity loan is completely separate from your first mortgage, which means your original payment and interest rate remain untouched.

Typically, a well-qualified borrower can get a loan for up to 90% of the home’s equity. Equity is calculated by subtracting your existing mortgage amount from the current market value of the home. Tappable equity is the amount that you can actually borrow against while still leaving a 5%-15% equity buffer that you retain.

Home equity loan rates in Washington, DC can be locked-in to a competitive fixed rate, and a maximum term of 40 years is often available. That means manageable, predictable payments for the life of the loan.

Using your home’s equity to secure a home equity loan (HELOAN) or a home equity line of credit (HELOC) can be a great way to leverage your home’s value to make important purchases and attain financial goals. The choice of which option comes down to how you intend to use the cash:

• Home equity loan: A home equity loan in the District of Columbia is very similar to a traditional loan, except your home’s equity is the collateral. Payment is issued in a single lump sum, and the maximum amount can generally be up to 90% of your home’s equity. This high lump sum, coupled with fixed interest rates and longer repayment terms, makes this the best option for larger planned purchases expenses like college tuition, medical bills, debt consolidation, and home renovations. There are very few restrictions on how you may spend the cash.

• Home equity line of credit: A home equity line of credit in Washington, DC works more like a credit card, except your credit limit is set by how much equity you have in your home. HELOCs give you a generous spending period, where you can make purchases as necessary and pay down balances as you go – just like a credit card. You will only pay interest on the amounts you borrow, and the rates are typically lower than credit cards, however the interest rates will fluctuate with market conditions.

When deciding between a HELOC vs HELOAN, remember that it’s all about the intended use of funds. Are you making a single specific or expensive purchase but want to pay it off slowly over time? A HELOAN is a fantastic option. Are you looking for a flexible spending solution that gives you a revolving balance and time to make smaller purchases as needed? Then a HELOC is likely your best bet.

Leveraging your home’s equity offers several benefits over traditional personal loans. However, it is important to understand its potential drawbacks, as well. Here are some of the more pertinent pros and cons of a home equity loan in Washington, DC:

Pros:

• Funds are disbursed in a single lump sum, making it ideal for large purchases.
• Your low-rate first mortgage will be left intact.
• Competitive interest rates and long repayment term (up to 40 years) provide for a low, predictable monthly payment that’s easy to budget for.
• There are virtually no restrictions on how you can spend the funds.
• Home improvements you fund with a home equity loan can increase your overall property value.
• The interest from your HELOAN is often tax deductible.

Cons:

• Rates are competitive, however they may not be as low as the rate on your first Washington, DC mortgage.
• Home equity loans in Washington, DC can increase your total debt burden.
• Because your home is being used as collateral, you could potentially lose the home if the loan is not paid back as agreed.

Your home’s equity isn’t the only thing that lenders are looking for when you apply for a HELOAN. Your personal credit and finances will also be taken into consideration. Here are the biggest factors to have ready when you apply:

• Credit: Your credit score should be at least 640 when applying. The higher the better. Good payment history and responsible borrowing is also an important factor. You should aim to have your debt-to-income ratio (DTI) below 43% for the best chances at a competitive approval. You can download the Griffin Gold app today to monitor your credit score and finances to create a successful HELOAN action plan.

• Income: To prove your ability to repay the loan without stretching your budget thin, you’ll need to provide proof of steady employment and reliable income. Tax returns, pay stubs, W-2s, and other documents may be requested to help build your application. If you are self-employed, Griffin Funding proudly offers a bank statement HELOAN that lets you qualify using a series of bank statements instead of the typical pay stubs.

• Equity: Most lenders will want to see that you have accrued at least 15%-20% equity in your home before considering for approval. The amount you are ultimately approved for will ensure that you still retain 5%-15% equity in the home after funds are disbursed.

A Washington, DC home equity loan can be a great alternative to personal loans for large purchases or to consolidate your high-interest debt into a single, manageable account. Because you’re using the home’s equity as collateral, Griffin Funding can offer very competitive, fixed interest rates and transparent repayment terms.

Apply now using our quick and easy online application, and let our knowledgeable loan agents walk you through the process to utilize your home’s equity and achieve your financial goals.