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What is a Home Equity Loan?
Home equity is the difference between the fair market value of a property and the balance of the mortgage owed against it. Home equity loans allow homeowners to access their equity in a lump sum of cash, which may be used for a variety of purposes, and is repaid in monthly installments. Home equity loans usually have fixed interest rates and are fully amortized while a home equity line of credit (HELOC) provides a line of credit that allows you to draw funds up to your maximum credit line.
- Home Equity Line of Credit
- A home equity line of credit (HELOC) is a type of secondary financing that consists of a revolving line of credit secured by a lien junior to a... <a href='/glossary/what-is-home-equity-line-of-credit' title='See the full definition of Home Equity Line of Credit'>read more</a>
- Home Equity
- Home equity is the difference between the market value of a home and any outstanding mortgage balance(s). A homeowner with a $200,000 property and a... <a href='/glossary/what-is-home-equity' title='See the full definition of Home Equity'>read more</a>
- Home Equity Loan
- A home equity loan is also called a second mortgage. It allows the homeowner to borrow against home equity (which is the difference between the... <a href='/glossary/what-is-home-equity-loan' title='See the full definition of Home Equity Loan'>read more</a>
- Home Equity Conversion Mortgage (HECM)
- The most popular reverse mortgage program in the US. It’s administered by HUD and is also referred to as an FHA reverse mortgage. Reverse mortgages... <a href='/glossary/what-is-home-equity-conversion-mortgage-hecm' title='See the full definition of Home Equity Conversion Mortgage (HECM)'>read more</a>
Start Accessing Your Home Equity
To access your home equity, you have two options: a home equity line of credit (HELOC) or home equity loan. A HELOC acts as a credit card in that it’s a revolving line of credit. You make payments and pay interest only on the amount that you spend. With a loan, you receive one lump sum and make fixed monthly payments on that amount for the entire length of the term.
If you have equity in your home, a home equity loan lets you exchange a part of this equity for cash. You can use this cash loan to make home improvements or upgrades, pay for college tuition or medical bills, or go on vacation. It’s really up to you. And, the interest you pay on the loan is tax deductible. Not sure if you have enough equity built up in your home? Use our home equity loan calculator to estimate your home equity.
These loans have the same expenses as your mortgage - an application fee, title search, appraisal, attorneys’ fees and points (a percentage of the amount you borrow). Home equity lines of credit (HELOCs), on the other hand, may not have fees at all. Read more about the differences between home equity loans and HELOCs at LendingTree to make sure you get the best equity loan for you.
If you have significant equity built up in your home, you may want to consider a reverse mortgage loan. Reverse mortgages are designed for homeowners age 62 and older looking for an additional source of income.
One of the best reasons to cash in on your home's equity right now is that interest rates for equity loans are lower than they've been since 2008. Many homeowners are taking advantage of these interest rates now while they're so low. We can help you find the lender you need to get the best rate possible.
Top 5 Reasons To Get A Home Equity Loan
- Take advantage of low interest rates.
- Make home improvements that add value to your home
- Get cash for a large purchase
- Pay for college
- Consolidate debt
If you are still on the fence about turning your home's equity into cash, download LendingTree's home equity loan guide below:
Your Free Guide To Home Equity
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