What is a Home Equity Loan?
A Home Equity Loan is sometimes referred to as a “Second Mortgage” because you are using the value of your home as security for the loan, just like a traditional mortgage. However, a Home Equity Loan is taken AFTER you have purchased your home. The initial mortgage does not have to be entirely paid off, but your mortgage balance and Home Equity Loan should not exceed the total value of your home.
What are the Benefits of a Home Equity Loan?
- Low Interest Rates – Because the loan is secured by the house, interest rates tend to be lower than other types of loans.
- Higher Limits – The amount of the loan depends largely on the value of the house. This allows homeowners to borrow more money than might be available with other types of loans.
- Longer Terms – Home Equity Loans generally have longer terms due to the higher amount of the loans. Longer terms allow borrowers to choose lower monthly payments that fit into their budgets.
- Loan Approval – Securing a loan with a house may make it easier to get approved for a loan, even if your credit score is not exceptional.
See a Loan Officer for additional details.
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What should I think about when considering a Home Equity Loan?
- Value of Home – Home Equity Loans depend on the value of your home as security. Evaluate how much you think you home will appraise at before applying for the loan.
- Fees & Closing Costs – Home Equity Loans generally require an appraisal fee and closing costs to be paid by the borrower. The amount of these costs depend on a variety of factors. Keep in mind, you may need to have the money to cover these costs before completing the loan.
- Delinquency – Defaulting on any loan is a problem, but defaulting on a Home Equity Loan can result in foreclosure and loss of your house. Make sure you can afford the payments and consider additional loan protection options in case of emergency situations like job loss or injury.
How do I apply for a Home Equity Loan?
- Application – Fill out our online application Apply Here, or come into the office for a paper copy. (For loans over $35,000 please use our partner website, Owner’s Choice.)
- Paperwork – We will need proof of income for all borrowers and the up-front appraisal fee, currently $375.00*
- Appraisal – Once the appraisal fee is collected, a certified appraiser will schedule a time to view your home. Depending on the loan details, this may be a full inside/outside appraisal or just an outside appraisal.
- Commitment – After the appraisal, our Loan Officer will contact you with the results and terms of loan. We will discuss the closing costs and payment options. If you accept the terms, the papers will be drawn up to finalize the loan.
- Finish – Once all the loan papers have been completed and all borrowers have signed, the funds will be distributed to the borrowers.