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Home Equity Loans

Home equity loans, sometimes referred to as a second mortgage or "borrowing against your home", can open up a lot of avenues as a funding source for a current homeowner. Home equity loans are, in their simplest form, fixed rate home loans that allow you to tap into the money you've already invested in your home to finance larger debts at a lower interest rate than most revolving credit options. Home equity loans can be used for consolidating consumer debt or covering a large expense such as a wedding, college tuition, or home renovations. These loans are great in that they use the collateral of your home to secure the loan, allowing you to get a better rate out of the deal and make lower payments than you would to a credit card or even on a personal loan. Home equity loans are attractive to borrowers because they typically have a lower interest rate, they are easier to qualify for even if you have bad credit and payments on a home equity loan may be tax deductible.

Historically, home equity loans were strictly used for home improvements that would increase the value of your home. However, these loans have become a viable option for large, non-home improvement related purchases or even for consolidating outstanding debts into one monthly payment at an affordable interest rate. While home equity loans are a great way to release extra cash which is tied up in your home, borrowers must be fully aware that they are using their home as collateral. In the event that their loan obligations aren't met, they could lose their home.

So how much can you get? Equity simply refers to the cash value that has accumulated in your home since you have been making regular payments over time. Equity is easily calculated by subtracting the amount owed on the home from the current market value. Equity loans allow homeowners to borrow money against their home's calculated value. The loans, secured by real estate, are generally considered safer by lenders. Because of this your interest rates tend to be lower than credit card rates or consumer loans. In addition, regardless of the rate, the interest on debt secured by the mortgage or lien on your personal residence is usually tax-deductible. Please consult your tax professional for more detailed information.

Although most lenders like home equity lending and may be more liberal because they view home equity loans as relatively safe, it's still a loan. While the chances of your approving for an equity loan may increase, you're not going to get a complete pass on the "process". Lenders will still have to review the credit history of potential borrowers to determine their credit worthiness. Lenders consider several factors such as your credit history, ability to repay the loan, and your homes equity (noted above) when deciding how much money to lend. In general however, lenders are more willing to loan you the money even with poor credit because your home is used for collateral.

At the end of the day, home equity loans are a great deal if you are sure of your ability to pay them off. Because they typically have a lower interest rate, are easier to qualify for (even with bad credit) and the interest may be tax deductible, home equity loans are a great option for individuals. Like anything else however, buyer beware. Lesser known lenders frequently target people in vulnerable situations with troubled credit by offering what appears to be an easy solution. Hidden fees and confusing rate calculations can get make a bad situation get worse. Lenders in our network are well-known, name recognized sources who will determine the lowest rate available to you based on YOUR individual variables including, but not limited to, self-stated credit rating, collateral, and your ability to repay.