If you are interested in applying for a home equity loan or a home equity line of credit, you will find several lenders awaiting your application, as this is a common option to borrow from you earned equity as you have continue to pay the mortgage balance down while the home value has improved. A good institution will provide you with a convenient application process by getting a detailed and clear explanation regarding the suitable loan options. Also, the service should be tailored based on your needs.
Selecting the Option is Right for You
If you’re looking for traditional payments where you agree upon a fixed interest rate, loan amount, and terms, a home equity loan may be right for you. The interest rate will likely be less than a credit card and you can spread out payments over the next 15 years or so. On the other hand, if you are used to a credit card but are interested in a much larger amount that you can borrow from, then a home equity line of credit may be your option. Just be careful that the line amount can be tempting to continue borrowing from and the unnecessary purchases can add up quickly.
How Much Equity Can I borrow?
Provided you have a solid credit and income history, you may be approved to borrow up to 80% of your home’s value. So, if you take what is left on your mortgage (say $200,000) and divide by your home’s value ($300,000), you would have roughly 13% remaining to borrow, or $40,000. You can decide how much you need whether you’re completing a home renovation, paying off debt, or even taking a vacation.
Where Should I Start?
The good news is you should have no shortage of options to seek out a home equity loan, and much like all purchases you make, doing a little comparison shopping and getting the best deal is key. It’s a significant balance, so any bump in interest rate will cost you each month. Of course, any blemish on your credit report may cause hurdles to your application process, so each situation is different, but here are a few places to start:
Current Mortgage Company: while it’s not as simple as handing money over since they already have your business, but your current mortgage company may be offering discounts on interest rates or any application fees if you take out an additional loan with them.
Branch that Handles Your Checking/Savings: your bank may offer a home equity loan option, with possibly limited documents you have provide since they hold your current asset information.
The Big Banks: you should avoid having your credit pulled until you decide on proceeding, as the number of inquiries can hurt your score, but comparison shopping online from site to site is a good idea to see roughly what the fees and qualifications will be to apply.
Local Credit Union: it can be argued that you should transfer all of your banking needs to your local credit union as there are lower monthly charges for checking and savings, not to mention ATM fees, as the same is true for mortgages, having typically lower fees than other larger banks.
