Need some extra cash? Life is full of surprises. Sometimes, unexpected costs hit you out of nowhere. When they do, you may find yourself in a situation where you’re scrambling for cash. The good news is, if you’re a homeowner, you may be able to take out a home equity loan.
Home equity loans can be used to pay for all types of expenses. You can obtain funds to pay for your child’s college tuition, consolidate debt, or even finance a home renovation project.
However, no loan comes without costs. There are pros and cons to taking out a home equity loan. This guide will teach you everything you need to know.
A Comprehensive Guide to Equity-Based Home Loans
Home equity loans can provide homeowners with access to funds that can be used to pay for various life expenses. Whether or not it’s the right option for you all depends on your situation. Here are some important details that you should know before you apply.
What Are the Benefits of Home Equity Loans?
If you’re looking for a way to get access to additional funds, a home equity loan might be a good option. Home equity loans offer borrowers many benefits such as:
- Fixed interest rates: Taking out a home equity loan means you will have a fixed interest rate. This is different from a home equity line of credit (HELOC), where the rate could change unexpectedly.
- Competitive rates: Home equity loans typically have lower interest rates than credit cards or personal loans.
- Tax benefits: The interest paid on a home equity loan can be tax-deductible up to $100,000.
- Quick access to funds: Home equity loans are delivered in a lump sum. That means you’ll get the full amount upfront. You’ll repay the loan as part of your monthly payments.
- Secured loan: Home equity loans typically have better rates because they are secured. Essentially, your home is used as collateral for the loan. This makes it a less risky transaction for your lender.
A Step-By-Step Guide to Calculating Your Equity
Here is a step-by-step guide that can help you calculate your home’s equity.
Find Your Loan Balance
First, check your home loan balance. You can check your monthly statements or contact your loan provider to inquire about your balance.
Estimate Your Home’s Value
Next, you need to get an estimate of the current value of your house.
Perform the Calculation
Now that you have these two figures, you can calculate your equity. Take the difference between your mortgage balance and your home’s value. For instance, if your property is worth $250,000 and your mortgage balance is $150,000, then you have $100,000 in equity.
Home equity loans are ideal for people who own a home and need a large amount of cash. They are usually available at a competitive rate with fixed interest. If you are curious about how much you can take out with a home equity loan, you can use the steps above to calculate your equity. Or, simply give us a call and we’ll guide you through the process!
Get More Information
Looking for more information? Still have questions? Contact us to learn more about home equity loans or begin the application process.