Borinquen Realty

What is a Home Equity Loan?

Home Equity Loans are just that, loans based on your EQUITY in the home.

Home Equity Loans are most commonly second position liens (second trust deed), although they can be held in first or, less commonly, third position. They are 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.

How it is Work?

Home Equity Loans are usually drawn by writing checks as opposed to one lump amount of cash, so you only pay interest on the money you actually use.

Home Equity Loans are wonderful if you have enough equity built up in your home that you can get a loan against the equity.

Home Equity Loans are a potentially money-saving option for consolidating debt, improving your credit score, or financing home improvement projects, and are 2nd mortgages that can be used for consolidating debt financing new home or improving and remodeling your primary residence.

Home Equity Loans are designed to be paid off over a fixed period of time.

Home Equity lines of credit, like credit card agreements, require only that the borrower make a minimum monthly payment.

Is the Home Equity Loan Tax Deductable?

They may also offer tax advantages that personal loans may not–if the loan meets IRS guidelines and you itemize your deductions.

How to Get a Home Equity Loan?

Many people don’t realize that a Home Equity Loan is available to many homeowners. Home Equity Loans are generally based on a given percentage (usually 80 percent) of your home’s appraised value, minus your remaining mortgage balance. For example, if your home were appraised at $150,000, 80 percent of that total would be $120,000.

Many banks offer teaser rates or interest only loans which have little money due now, but in the near future come due with higher payments which may leave many borrowers in debt over their heads.

So, Should You Get a Home Equity Loan?

Some people feel that Home Equity Loans are trouble waiting to happen.

Be careful! Don’t overextend yourself!

To find out what your current Home Equity is worth, simply subtract your outstanding mortgage balance from your home’s current value.

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