Home Equity Loan Process - FAQ

At some point in your life, it’s likely that you’ll be put in a situation in which you need a lot of money relatively quickly. Whether it’s to pay for medical cost, a child’s college education or to repair a collapsing roof, you can sometimes be caught unexpectedly.

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Fortunately, homeowners can find a quick and reasonably inexpensive source of funding in the equity on their home. By taking out a home equity loan and starting the home equity loan process, homeowners can get through the lean times comfortably. In this article we’ll answer a couple of the most frequently asked questions about Home Equity Loans.

How Do They Work?

A home equity loan, also referred to as a second mortgage - is simply a loan that is secured against the equity on your home. Your home’s equity is basically the difference between the market value of the property and the amount still to be paid on your mortgage. For example, if your house is valued at $200,000 and you still have $50,000 remaining on your mortgage, you have $150,000 in equity. You can use this as collateral to secure a home equity loan. Simple.

How Much Can I Borrow?

Well, mortgage lenders will typically lend you up to 100% of the equity on your home. However, there are lenders who will offer over-equity loans, that is, a loan that exceeds the equity of your property.

What Sort Of Rate Will I Get?

Well, that can depend on any number of factors, your credit score, income and a number of other factors. However, you may not have to worry so much about that. You may be able to count the interest on the loan as a deduction on your tax return as the loan is secured by your property. Before you get excited, though, you should definitely speak to your tax adviser about your specific situation.

So, now you see that the home that you worked so hard to pay for can now come in useful for something other than putting a roof over your head and giving you a handy place to keep your couch. It can also help you ride out the lean times when money gets tight.

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Rates as of Thursday, July 24, 2008

Institution Rate % APR
eloan 5.875 5.911
indymac 5.875 6.033
wellsfargo 5.875 6.051

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