5 Essential Facts About Home Equity Loan That You Need To Know
Nowadays, almost all US citizens have resorted to the mortgage loan to get their dream home. And as one slowly repay his or her mortgage loan over the years, the equity value of his/her home increases,When You Need Money Now by Everybody Loves Your Money. Also, the home equity value can have a significant boost if a person pays an upfront downpayment of at least 20 percent or above.
If your home has built a tremendous amount of equity, you can tap this value and use it for any reason you want. However, you must keep in mind that applying for a home equity loans in texas will put your home at risk of being foreclosed whenever you fail to pay the loaned amount.
Many homeowners, on the other hand, still had no idea what is home equity loan, and what are the things that come into it? In this article, we are going to discuss five essential facts about the home equity loan.
There are Two Types of Equity Loan that You Can Choose From
Equity Loan offered by home equity loans in texas come in two types. First is the Home equity loan (HEL) and the second is the Home equity line of credit or HELOC. If you apply for a Home equity loan, the lender will give you the total amount once the loan is approved and the repayment term is up to 30 years. On the other hand, a Home equity line of credit or HELOC will deposit the amount you have loaned into your bank account. It acts like a credit card wherein you may withdraw a certain amount and use the money for whatever purposes you have in mind, and the repayment term is similar to HEL. The maximum amount you are allowed to loan in both types of equity loans is equivalent to 85 percent of your home’s current equity value.
Lenders will not Allow You to Loan Small Amount
While the maximum amount that a lender can give to their borrower using a home equity loan is $750,000, they don’t approve loan amounting to less than $10,000. It is highly advisable that you need thorough planning on how much money do you need and to what purpose you plan on using it.
The Rate and Terms are Different from Regular Mortgage Loan
Home equity loan and HELOC tend to have higher interest rates compared to your existing mortgage loan. Especially if you have chosen HELOC over HEL loan since HELOC interest rates wholly depend on the current national economy and market conditions. And as mentioned earlier, the terms are payable in 30 years, which means you have to pay your loan longer than your existing mortgage.
As long as you have a good credit score and a stable source of income, getting approved is easy. However, if you are aiming for lower interest rates, aim for a high credit score, and clean credit history.