Home Equity Loan Considerations
When you're ready to access the equity in your home, a home equity loan (HEL) can be a convenient way to do it. But before you apply for a HEL, there are a few things you should know about this type of loan.
What is a home equity loan?
A home equity loan is a second mortgage on your home. You can borrow up to 80% of your home's value, minus any outstanding mortgage balance. The loan is secured by your home equity, so if you default on the loan, the lender can foreclose on your home.
What are the interest rates on home equity loans?
Home equity loan rates are typically lower than rates on credit cards or personal loans. And because your home equity loan is secured by your home, the interest you pay may be tax-deductible.
What are the terms of a home equity loan?
Home equity loans typically have a fixed interest rate and a fixed monthly payment. The term of the loan is usually 5-15 years.
How do I apply for a home equity loan?
You can apply for a home equity loan online, over the phone, or in person at a bank or credit union. You'll need to provide some financial information, including your income, asset, and liability information.
What are the risks of a home equity loan?
The biggest risk of a home equity loan is that you could lose your home if you can't repay the loan. Before you apply for a home equity loan, make sure you understand the terms and conditions and can afford the monthly payments.