Home Equity Loans
Your home equity is the difference between your current mortgage balance and the market value of your home. Once you’ve paid off enough of your mortgage and/or your home’s market value has increased, you can use a home equity loan to borrow money at a low interest rate.
What is a Home Equity Loan?
A home equity loan is also known as a second mortgage. Home equity loans come with fixed interest rates and a predetermined repayment term. You’ll receive the total loan amount upfront and make regular monthly payments until it’s paid off.
Benefits of a Home Equity Loan
- Interest rate is fixed, so there are no surprises with your payment amount.
- Lower interest rates than other types of unsecured loans.
- Funds can be used for just about anything, such as home renovations or a child’s college education.
- Interest payments may be tax-deductible.
When to choose a Home Equity Loan
If you have a specific use for the money in mind, and enough equity to finance it, a home equity loan may be your best option. However, an alternative is the Home Equity Line of Credit. This type of financing also allows you to borrow against your equity at a low rate. The main difference is that the HELOC comes with a variable rate and isn’t disbursed in a lump sum. Only borrow what you need and only pay interest on what you borrow. Finally, a mortgage refinance is another option when you want to get cash out of your equity and change the rate and/or terms of your loan.
Home Equity Loan FAQs:
How do I qualify for a Home Equity loan?
It’s similar to qualifying for your first mortgage. You’ll need a good credit score and debt-to-income ratio, as well as proof of income. You also need to have at least 20% equity in your home.
How much am I eligible to borrow for a Home Equity loan?
This depends on how much available equity you have overall. Generally, you can borrow up to 75-90% of your total equity.
What can I use a Home Equity loan for?
The answer is just about anything, though some uses may be more advisable than others. For example, increasing the value of your home through renovations is a better use than paying for a vacation or wedding. Consolidating higher interest debt, such as credit cards, is also a common use for home equity loans.
Why is a Home Equity loan an attractive option for financing?
Because a home equity loan is secured (by the value of your house), interest rates are lower than what you’d get with an unsecured personal loan or credit card.
What kind of fees and closing costs can I expect with a Home Equity Loan?
It varies, so your lender will review closing costs with you beforehand. Fees may include the application or loan processing, origination or underwriting, lender or funding, appraisal, and/or document preparation and recording.
Learn more about
Home Equity Loans from your Community Mortgage Lender
Since 1919, BTC Bank has provided personal customer service to local communities in Northwest Missouri. We have a rich history of helping our customers become homeowners and we can help you, too. To explore the benefits of Home Equity loans and verify your eligibility, visit a BTC Bank branch near you or contact us today. Our friendly mortgage lenders are waiting to serve you at 12 convenient locations in Albany, Beaman, Bethany, Boonville, Carrollton, Chillicothe, Gallatin, Maysville, Osborn, Pattonsburg, and Trenton, MO; and Lamoni, IA.