What is a Home Equity Loan

Black Section Separator

Home equity loans are typically used for large expenses, such as home renovations, medical bills, or debt consolidation.

[{"selector":"#anim-3c4450f1-1980-4c1d-b215-b2df46f9a2ee","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-091fc598-2b8d-41d8-95ac-b80ae147e075","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] Black Section Separator Image Credit goes to Google Images

The loan amount is based on the difference between the current market value of the home and the outstanding mortgage balance.

[{"selector":"#anim-5baee7c7-b0e2-4211-96e3-cd0f9335e8f6","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-e1bfcdd3-fd17-47ae-a493-79e43932c309","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] Black Section Separator Image Credit goes to Google Images

Homeowners can generally borrow up to 80% to 90% of the home's equity, depending on the lender's policies.

[{"selector":"#anim-db202822-0288-4706-a8dd-d237062d0839","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-6119d5bd-9596-4fc1-983a-d6f9c1c48776","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] Black Section Separator Image Credit goes to Google Images

Home equity loans typically have fixed interest rates and fixed monthly payments over a set term, usually 5 to 30 years.

[{"selector":"#anim-2ec61f89-b1b2-44e2-aad7-582ecf2efccb","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-ec944144-ea6a-40aa-8609-977e19469e83","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] Black Section Separator Image Credit goes to Google Images

The interest on a home equity loan may be tax-deductible if the loan is used for home improvements, but borrowers should consult a tax professional for advice.

[{"selector":"#anim-756b2ed2-b0b9-4a4e-a726-6af7f8596f62","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-efd6f46e-f9a1-40cb-abc4-6bf67e38f304","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] Black Section Separator Image Credit goes to Google Images

Failure to repay a home equity loan can result in foreclosure on the home.

[{"selector":"#anim-ae77d443-e8e6-4a52-9e32-0c2e7b3fad9a","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-60c80851-c4af-494d-ba96-1d943b2a192f","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] Black Section Separator Image Credit goes to Google Images

Home equity loans typically have higher interest rates than first mortgages, as they are considered to be riskier loans.

[{"selector":"#anim-a3ef67d5-ae40-4a5e-aeeb-0e68457eb08a","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-bcc32ac3-3b4d-469c-ac25-9f16086dd381","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] Black Section Separator Image Credit goes to Google Images

The application process for a home equity loan is similar to that of a first mortgage, including a credit check and appraisal of the home's value.

[{"selector":"#anim-4756bd1c-4490-43e1-8425-8fc2299dd1cc","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-cc3bd412-5225-4be0-bac2-96e7406eaee8","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] Black Section Separator Image Credit goes to Google Images

Some lenders may offer a home equity line of credit (HELOC), which allows homeowners to borrow money as needed up to a certain credit limit.

[{"selector":"#anim-0cf7af8d-9b4b-48a1-81c1-433f4c81c56d","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-8695a4b1-05eb-49f3-ae51-604e2a220092","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] Black Section Separator Image Credit goes to Google Images

Homeowners should carefully consider their ability to repay a home equity loan and weigh the potential risks and benefits before applying.

[{"selector":"#anim-f7afdfaa-58c7-4c06-8aa0-09faa8932fab","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-de1134d1-d450-4ed1-8613-50d96954e325","keyframes":{"transform":["scale(1)","scale(1.08)","scale(0.992)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":500,"duration":1600,"easing":"ease-in-out","fill":"both","iterations":1}] Black Section Separator Image Credit goes to Google Images

More

[{"selector":"#anim-1213133a-9646-4edd-b1c7-94c390b61ff8","keyframes":{"transform":["scale(1)","scale(1.05)","scale(0.995)","scale(1)"],"offset":[0,0.33,0.66,1]},"delay":0,"duration":600,"easing":"ease-in-out","fill":"both","iterations":3}] [{"selector":"#anim-670d71f7-c95d-487c-8da0-5755d7c49035","keyframes":{"opacity":[0,1]},"delay":0,"duration":1500,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-a1a414e5-4a78-41ef-9569-a51f53b9fc94","keyframes":{"transform":["translate3d(0px, 453.29402%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":1500,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Learn more