Best Home Equity Loan
Home equity loans can be an excellent tool to consolidate debt, pay for your child’s college tuition, or finance a home improvement project. Even borrowers with less than perfect credit can qualify for large loan amounts at competitive rates. But there are risks to consider before you apply for a home equity loan.
Common Questions
What is home equity?
Simply put, home equity is the difference between your home’s total value and what you owe on your mortgage. For example, let’s say that your home is worth $280,000, and the balance on your mortgage is $200,000. In this case, you’d have $80,000 of home equity to borrow against.
As you would expect, home equity loans come with limits. You can’t borrow the full amount of equity in your home. In general, you can borrow up to 85% of your total home equity. Based on the above figures, the math works out as follows:
- $280,000 total value – $200,000 remaining mortgage balance = $80,000 in home equity.
- $80,000 x 85% = $68,000 available to borrow.
However, other factors, such as your income and credit history, are also taken into consideration when determining how much you can borrow.
Home equity loans may not be as common as they were back in 2008, but very low interest rates still make them worth looking into.
Is there anything I can do offline to improve my results?
Our comparison tools allow you to compare the rates and terms of lenders in a transparent and simple way. If you keep your priorities in mind and make sure you know the answers to the key questions we cover below, you can find an excellent lender right here.
This doesn’t mean you can’t do some offline legwork if that makes you more sure of your results.
In addition to researching lenders online, you may ask your family and friends for lenders they would recommend. Real estate agents often work with loan originators and know who helps their clients most. So real estate agents, too, may be worth talking to.
You may also talk to banks, credit unions, nonbank lenders, and mortgage companies. You can even speak to mortgage brokers. But remember, they are in the business of arranging loans and are not always impartial.c
What are the lender’s home equity loan requirements?
Most lenders require you to have at least 20% in home equity, solid proof of income, and a credit score of 680 to qualify for a home equity loan. However, requirements will vary from one lender to the next. So compare the requirements before applying to find those that match your situation.
What interest rates does the home equity lender offer?
Home equity loans typically come with fixed interest rates, meaning you pay equal monthly payments over a fixed term. The interest rate will be expressed as an annual percentage rate (APR) that encompasses interest, financing charges, and points.
Lenders will typically advertise a range of APRs. The rate you receive will depend on the lender’s approval criteria, which can include your credit score and income. The housing market and the amount of equity in your home also play a role.