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Home Equity Loan

If you currently have a mortgage, you’ve probably already built up some home equity. Use it to guarantee your next financing and get more out of your home mortgage!

Home Improvement Financing
Loan conditions
Loan conditions
  • Be over 18
  • Have a valid ID/passport
  • Be a US citizen or permanent resident
  • Have a contractor
Mortgage Loans
Origination Fee

0.5% to 1%

Minimum down payment

3%

Mortgage conditions
Mortgage conditions
  • Be over 21
  • Have a valid ID/passport
  • Be a US citizen or permanent resident
  • Have a source of income

What is a Home Equity Loan?

 

This is a type of loan that works as an installment loan - fixed monthly payments during a specific period of time. They are also known as second mortgages.

A home equity loan means that a person borrows money against the equity of their residence, based on the difference between a home's current market value and the mortgage balance due.

Since this loan is secured - using your property as a collateral -, it allows you to access larger amounts of money easier than personal loans do.

Fees on these loans exist like most of them and the most common ones tend to be the origination fee, application free, processing fee and others. But almost almost all of these loans charge around 2% and 5% for closing costs.

When talking about Home Equity Loan, it can be represented by two options: The regular loan with fixed-rates and a HELOC - Home Equity Line of Credit - which provides one lump sum, depending on the equity value of your home.

 

The best part of this loan? You can use it for anything you need like:

 

  • Do home repairs or improvements

  • ► Make a vehicle or other large purchase

  • ► Go on Vacations

  • ► More

 

How to get a Home Equity Loan?

 

Getting a Home Equity Loan can be resumed in 6 moments:

 

  1. Shopping around for loans is the first thing to do. You can get one of these from a local bank, a credit union, a broker or through an online marketplace. At this moment, you will compare lenders and their criteria, and decide which loans you are eligible for, and which rates and costs fit your budget. 

  2. Time to apply! Fill out an application - online, in person or over the phone. Only apply to the one you can qualify for and call your attention the most in order to avoid affecting your credit score by doing several applications.

  3. Provide personal details to your lender. You will have to focus on providing accurate information about your income, employment history and debts. In this árt, you will also have to prove your home equity - which should be at least 15% to 20%. 

  4. Wait until an answer from your lender. They will check all the information provided, pus your credit and home appraisal to make an offer to you if they decide so. This part of the process might take days or even weeks. If you’re approved, details of the loan will get to you soon. If you’re denied, your lender should tell you why.

  5. When closing the agreement, you will have to sign documents and agree to the terms of repayment.

  6. Get the funds and use them for whatever you need. Make sure you start repaying on time and according to the contract signed. 

 

What to consider when shopping for a Home Equity Loan?

 

Take into consideration these few facts when you are trying to get a Home Equity Loan:

 

  • Your home is playing a vital role in this process. If you are not real with your ability of repayment, you might end up losing your home. Try to evaluate every detail of the products plus read the fine print of them before committing to a debt you have possibilities to fail.

  • Do not only focus on large banks but also analyze credit unions and local banks that can give you more personalized services and better interest rates.

  • This is a type of mortgage, so you might be able to get an estimate. To do so, make sure you think you are able to be approved with that lender in order to not waste time.

  • Before signing any contract, estimate the amount of interests you will pay and compare it to the loan length as well. This will show you if the loan is really worth it or you can try with another product.

  • This loan can be a good option for debt consolidation, as long as the overall loan will cost you less. 

 

Red Flags to be aware of

 

There are certain things that are common when you are negotiating with a lender. You should avoid working with this entity if:

 

  • The lender changes up the terms of your loan, such as your interest rate, right before closing under the assumption that you won't back out at that late date.

  • The lender insists on rolling an insurance package into your loan. You do not have to get attached to a product you really don’t want or know, unless you agree with it.

  • The lender is approving you for payments that don’t make sense according to your budget and probably can’t afford them. Remember, the lender gets to repossess your home if you can't make the payments and you ultimately default.

 

Pros and Cons of a Home Equity Loan

 

PROS

CONS

  • ✅You have more possibilities to get approved because you are using your house as a collateral.

  • ✅You will usually get a competitive home equity loan interest rate because your asset is valuable.

  • ✅Lower interest rates than other loans.

  • ✅You can access to borrow big amounts if your equity allows it.

  • ✅You can use the loan for whatever you want without having to prove its use.

  • ✅You possibly can access tax deductions.

  • ✅These loans have fixed-rates, which can help you predict your monthly payments and the cost of the whole loan as well.

  • ❌You risk losing your home if you fail on repayment of the debt.

  • ❌Closing costs are charged in this type of loan.

  • ❌You’ll probably take longer to pay off your first mortgage because it borrows against the equity you already built up in the house.

  • ❌Since it will take longer to pay off, you will pay more in interest.

  • ❌If you sell your house, you will have to pay the debt immediately.

 

 

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