What is a Home Equity Loan?

A home can be a source of equity used to accomplish financial goalsHome equity loans – sometimes referred to as private mortgages – are quicker, lump sum loans secured using your house as collateral. Home equity loans can be used for many things, including home improvements, major expenses, or even debt consolidation. 

Why Use my Home Equity?

Home equity loans are fantastic tools people can use to bridge the gap during challenging times. They can also use home equity loans to seize an opportunity when it presents itself. How is that possible?

Simply put, a home is the most significant purchase most people will make in their lifetimes. The wealth stored in a home is an incredibly valuable resource, one that can be leveraged to help you achieve your goals.

Once you’ve been approved for a home equity loan, you can use it for anything you want. You can use it to:

  • Start a business
  • Invest for profit 
  • Pay a family member’s tuition
  • Fund a wedding
  • Reduce your debt
  • Seize an opportunity!

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How Much Money Can I Borrow?

The amount of money you can borrow will vary according to your lender, and generally depends on a few factors. One of the most important factors is the amount of current equity you have in your property.

So what is equity, exactly?

In layman’s terms, home equity is equal to the difference between the value of a home and the unpaid balance of the current mortgage. For example, if a person had a home worth $350,000 and $100,000 still outstanding on their mortgage, you could say they have $250,000 in home equity.

The more equity you have in the property, the more money you can borrow. In fact, many homeowners don’t realize that they are sitting on such a huge reserve of untapped value, one that could come in handy should a major expense unexpectedly appear on the horizon.

How Can I Increase My Home’s Equity?

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Home equity increases when A) homeowners pay down their mortgages, and B) as the property’s value increases over time. However, those who don’t want to wait for time to tick by can speed up the process by doing well-targeted home renovations!

In this way, borrowing in the short term can improve your long-term financial health.

By using your home equity loan to fund home improvements, you can turn your loan into a profitable investment! Under the right circumstances, using a home equity loan in this way can quickly increase the value of your property, making you richer, sooner.

Homeowners that have paid down large portions of their mortgage (as well as those that saw their property value increase in recent years) could be in for a nice surprise when they learn exactly how much they could be eligible to borrow!

Home Equity Loans: Secure and Stable

When you take out a loan, the last thing you want to do is worry about interest rates going up and down, changing the size of your payments. You already work hard in order to pay back your loans every month, so why work harder than you need to?

Home equity loans are beneficial in this manner because they operate on fixed rates and terms. That means that lenders set up a payment schedule in advance so that homeowners can rest easy, knowing their payments are always on time, and always the right size. 

This peace of mind allows borrowers to focus on their own projects and goals, without the need to worry about variable interest rates

However, keep in mind this warning and fundamental fact: A home equity loan uses your home as collateral. If you can’t pay it back, it is possible you may lose your home. Borrowers should always be comfortable with the terms they agree to, and comfortable with the rates they agree to pay. 

Make sure you are well informed, and always speak to an expert to get advice you can trust.

Is a Home Equity Loan Right for me?

Home equity loans are the perfect vehicle to help homeowners achieve their goals.
Whether you’re navigating a financial storm or or plotting a course to the future, your best bet is always to do some research, speak to an expert, and try to ask the right questions.

Good luck!

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