Home Equity Loans
If you’d like to access cash from your home equity to consolidate high-interest debt, manage unplanned expenses, or accomplish any other goal requiring a significant amount of funds, a home equity loan might be the right option for you. It gives you a chance to turn your home equity into an asset without impacting your primary mortgage rate.
Consider a Home Equity Loan if You Have:
- At least 15% equity in your home
- A low rate on your current mortgage that is unavailable in today’s refinance market
- A need for extra money fast, whether for a renovation, debt consolidation or to cover an emergency expense
Discover the Many Benefits of a Home Equity Loan
Access your funds
Keep your primary
in a lump sum
Get a tax deduction for
home improvement costs*
Get cash for emergency expenses when you need it most
Tap into your equity to cover medical bills, emergency home repairs, education costs or other significant expenses. A home equity loan can act as a financial safety net for managing unexpected situations.Get started
Unlock your financial freedom by consolidating your debt
Combine your high-interest credit cards, auto or student loans and other debts into a home equity loan. Make just one monthly payment, while potentially lowering your interest rate, saving you money and reducing your debt faster.Get started
Get started on that home renovation project you’ve been planning for years
If you’re wanting to add a room, renovate your kitchen or tackle other expensive remodels or upgrades, a home equity loan is a great option. It can give you the funds you need to put your next project into action.Get started
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- Refinance your mortgage for a higher balance and receive the difference as cash
- Only one monthly mortgage payment to make
- Access cash from your equity and potentially lower your rate at the same time
Borrowers who want a large lump sum of funds while refinancing their loan for a different rate or term.Learn more & view rates
Frequently Asked Questions About Home Equity Loans
A home equity loan is a loan that allows you to borrow money against your home’s equity. Your home’s equity is the difference between your home’s current value and your mortgage’s outstanding balance. The loan payments are added on top of your mortgage balance, which is why a home equity loan is often called a “second mortgage.” Use our home value estimator calculator to get an idea of how much your home could be worth in your area.
A home equity loan allows you to access money that would otherwise remain tied up in your property and unavailable for use. It can be a great way to fund home remodeling projects, take care of unexpected medical bills, consolidate debt, pay education costs or get you through periods where income may be tight.
When you take out a home equity loan, the funds are generally dispersed in a lump sum and paid back in regular fixed installments over a predetermined amount of time (your term).
Once the home equity loan is finalized, the lender gives you the entire borrowed amount all at once. Then, as with any standard mortgage, you will make monthly payments, which include both the principal of the home equity loan, as well as interest.
How much your payments will be depends on a range of factors, including the interest rate and term. Loans with shorter terms, such as a 10-year loan, will typically have higher monthly payments, but the total interest paid will be lower over the life of the loan compared to those with longer terms.
Using a home equity loan to pay for home improvements can increase the home’s value and equity. For example, adding a bedroom increases the home’s square footage and seller market price – thus, allowing you to walk away with more money in your pocket. Additionally, you may have the opportunity to deduct the home equity loan interest from your taxes, helping you save money.
If you sell your home before you pay off a home equity loan in its entirety, be sure that the proceeds cover both your primary mortgage balance along with your home equity loan balance. Anything owed on the home will need to be paid off to complete the sale.
Home equity loan interest may be tax deductible, provided that your total mortgage debt is $750,000 or less, you itemize your deductions and you apply the loan towards substantial home improvements.
Consult a tax adviser for further information regarding the deductibility of mortgage interest and charges.
Similar to applying for a mortgage, you will be required to provide all necessary documents in order to qualify for a home equity loan. You are also responsible for closing costs, though you may have the option to roll some costs into your loan amount.
The documentation you are required to provide includes the following:
- E-sign loan disclosures
- Income documentation to support stated income
- W-2 wage earners: W-2s and pay stubs
- Self-employed: Two years of tax returns (business/personal or both)
- Retired: Proper award letters, 1099s and/or bank statements, etc.
- A credit report
- Bank statements
Qualifying for a low-interest rate for your home equity loan is dependent on your credit score, debt-to-income (DTI) ratio and payment history. Your credit score indicates your creditworthiness and the likelihood you will repay a debt, while a debt-to-income ratio compares monthly debts and payments to pre-tax monthly income. You can calculate your individual debt-to-income ratio using the following equation:
DTI = Total Monthly Debt Payments / Gross Monthly Income
The bottom line is borrowers with a higher credit score and a good debt-to-income ratio have a greater chance of qualifying for a home equity loan with a low-interest rate.
If you need a specific amount right away and don’t want to risk overspending, a home equity loan can be a reliable solution that is also relatively easy to budget for — the fixed payment plan will help ensure that you know exactly how much you will owe towards the loan every month until it’s fully settled.
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