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Home Equity Loan
Get Cash from your home
What cash-out option is better for me?
Need to tap into the value of your home? Two loan options can help: the Home Equity Loan (HELOAN) and the Home Equity Line of Credit (HELOC). Both unlock your home equity for your needs, but they work differently. Let’s break down the key distinctions!
Frequently Asked Questions
What is a Home Equity Loan?
Think of a home equity loan as getting a chunk of change upfront from your home. It’s different from a HELOC because you receive a one-time lump sum and start paying it back right away with fixed monthly payments that cover both the interest and the loan principal.
What is a HELOC?
Imagine a HELOC (Home Equity Line of Credit) as a credit card for your home. Just like a credit card, you have a set spending limit based on your home’s equity. You can withdraw money whenever you need it, and during the initial draw period, you’ll only pay interest on the amount you borrow. This lets you manage your finances and only pay for what you use.
Should I refinance my current mortgage, instead?
Hold on to your sweet mortgage rate! A cash-out refinance replaces your current mortgage with a new one, potentially wiping out that incredible interest rate you snagged. For many homeowners, this wouldn’t be ideal. That’s where HELOCs and home equity loans come in – they allow you to access your home equity without sacrificing your existing mortgage.
Where can I use the money?
Need money for that dream renovation, your child’s college tuition, or unexpected medical bills? HELOCs and home equity loans can unlock the equity in your home and turn it into cash for various goals. Think of it like an ATM for your home, giving you the flexibility to cover expenses, consolidate high-interest debt, or even secure a down payment on a new place while you sell your current one.
How much equity can I get?
Some lenders might offer home equity loans with a loan-to-value (LTV) ratio as high as 95%. This means you could potentially borrow a larger sum of money based on your home’s value. Let’s say your home is appraised at $700,000 and you still owe $400,000 on your mortgage. With a 95% LTV, you might qualify for a home equity loan of up to $265,000 ($700,000 x 95% – $400,000).
