Home Equity

Maximize your home's equity as collateral for loans

Home Equity

What is Home Equity?

Home equity is the difference between the appraised value of your home and any outstanding mortgage and loan balances. In most cases, home equity builds over time as you pay down mortgage balances or add value to your home. If you owe $150,000 on your mortgage loan and your home is worth $200,000, you have $50,000 of equity in your home.

Why Home Equity?

Your home equity can be a useful tool when you need to cover large expenses associated with home improvement, debt consolidation, college tuition, or other types of major expenses. It is an important asset for homeowners, since it can be used to borrow home equity loans or lines of credit. Because you can borrow against the value of your home, a home equity loan may also be easier to qualify for than other loans since the loan is secured by your house.

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The top questions people ask us

These loans are intended for big projects. A minimum loan amount would be $10,000. The maximum depends again on how much equity you currently have.

First off, you can expect to find a better interest rate than you would on a credit card or other unsecured personal loan. Remember that a cash out refinance and a HELOC are both considered second mortgages and, as such, are available at either a fixed or adjustable rate.

These types of loans generally do not have closing costs, but may have an application fee.

As both are home mortgages they share one similar advantage. The interest on either may be tax deductible. Check with your tax advisor to be sure.

Again, because these types of loans are considered a second mortgage they can be foreclosed on should you default on your payments. In the event you do so, your primary mortgage would be paid from the proceeds of the sale of your home by the bank. Your Home Equity Loan or HELOC would be paid second.

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Note: These are general Home Equity FAQs. We also suggest you read the FAQs for the Debt Solutions company we work with.