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What is a home equity loan?
1 A home equity loan, also known as a 鈥渉ome equity installment loan鈥?or a 鈥渟econd mortgage,鈥?is a type of consumer debt. 2 Home equity loans allow homeowners to borrow against the equity in their residence. 3 Home equity loan amounts are based on the difference between a home鈥檚 current market value and the mortgage balance due. More items…
Can you borrow against the equity in your home?
Borrow Against Equity in Your Home. If your home is worth more than you owe on it, a home equity loan can offer funds for anything you want鈥攜ou don鈥檛 just have to use the money for home-related expenses. However, using your home to guarantee a loan comes with risks. A home equity loan is a type of second mortgage.
What is the difference between a HELOC and a fixed-rate home equity loan?
Fixed-rate home equity loans provide one lump sum, whereas HELOCs offer borrowers revolving lines of credit. Essentially, a home equity loan is akin to a mortgage, hence the name second mortgage. The equity in the home serves as collateral for the lender.
How do I obtain a home equity loan?
Obtaining a home equity loan is quite simple for many consumers because it is a secured debt. The lender runs a credit check and orders an appraisal of your home to determine your creditworthiness and the combined loan-to-value ratio.