What is a Home Equity Loan?
A home equity loan is a loan that enables you to borrow funds against the value of a mortgage in your current home. A home equity loan is often referred to as a second mortgage and can really help households access large amounts of funds at a time.
How does a Home Equity Loan work?
Because a home equity loan will allow you to utilize a large amount of funds, this loan is typically repaid over time with fixed monthly payments. Another option within a home equity loan is to take out a Home Equity Line of Credit (HELOC). HELOC's are often attractive to those who want to option to take funds out as they are needing it and not all at once.
What are the benefits of a Home Equity Loan?
While taking out a Home Equity Loan can seem a bit scary, it is often used by many households and comes with some great benefits. Those benefits can include:
- Typically lower rates than on other loans you may be looking into
- A better chance of getting approved for the loan
- You can borrow large amounts of funds (as opposed to borrowing from credit cards or other personal loans)
- These loans are considered safe on the lender side
- Lots of tax benefits
- You can increase the value of your home by using the funds for home improvements
- You can use the funds for higher education or other needs
What's the first step to getting a Home Equity Loan?
The first step is to contact an expert Loan Officer to review your needs. The Loan Officer will then provide you with a loan estimate should this be the right loan for you. If you're ready, contact First Savings Mortgage today.
What factors can influence an approval on a Home Equity Loan?
While there is no clear and definitive answer if you'll be approved to obtain a Home Equity Loan or what your rate will be, there are some factors that can be a driving influence. Those factors normally include the following:
- You need a good amount of equity in your home (typically this can mean about 14%)
- You have a secure job that has provided you with a stable income
- A have what is considered to be a good credit score (above 620)
- You have a Debt-to-income ratio of no more than 43-50%
Of course, depending on your lender, there may be more factors but these are the general influencing ones to take into consideration.
If you feel that you are ready to make the next step and speak with a Loan Officer, feel free to reach out to us discuss all the options you can explore.