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What is a Home Equity Loan?
Author:Ari Socolow
on January 30, 2011
- modified on October 7, 2017
A home equity loan is a loan in which the borrower uses the equity in their home as collateral. Your home's equity is equal to its market value minus any mortgages or other liens owed on it.
A home equity loan is a loan in which the borrower uses the equity in their home as collateral. Your home's equity is equal to its market value minus any mortgages or other liens owed on it. Compare home equity rates.
In the early stages of your first mortgage loan, the majority of your monthly mortgage payments goes toward paying down the interest, but once you begin to make principal payments, the amount of equity in your home increases. Then, as your home appreciates over time, its equity grows even faster. The opportunity to use this equity is one of the benefits of homeownership.
As a financial tool, home equity loans can help you achieve many of your goals. The attractive rates can be lower than those of a personal loan or unsecured credit card - not to mention the added benefit of being tax deductible in most cases (always check with your tax or financial advisor before making any tax-related decisions).
A popular use of a home equity loan is for home renovations or repairs. By improving your home you are putting money back into your house, which can increase its value. Other reasons homeowners use home equity loans include:
Adding a room as their family grows
Purchasing a new car
Adding or renovating a pool
Taking that dream vacation
Paying for their child's education
Paying off outstanding debts
As emergency cash should unforeseen expenses arise
If you are a homeowner looking to use your home as a financial resource, then a home equity loan or home equity line of credit may be right for you. Always shop online to find the best home equity product that meets your specific needs. Compare home equity rates.
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to bank transparency and the climate crisis. Since co-founding BestCashCow in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.
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Conditions… Variable APR of Prime minus 1.01% in all states. Min loan amount $10,000. Max loan amount $200,000. 30-year term. Annual fee waived for the first year. See conditions for guarantee at thirdfederal.com.
Third Federal rate are typically 20% lower than other leaders
Guaranteed Lowest Rate
No closing costs, prepayment penalties, or minimum draw requirements
Please note that the interest rates offered are subject to change based on market conditions and borrower eligibility. The pricing and rate provided are accurate as of the specified date. It is important to be aware that the minimum loan amount for any loan program is $50,000. The specific amount and terms of the credit offer will be determined based on underwriting approval and guidelines, which include factors such as your credit history, your ability to make payments, and the available equity in your home.
To qualify for this offer, you must meet the required criteria and demonstrate creditworthiness. Additionally, providing up to two years of income verification may be necessary. The severity of your credit may also impact the required down payment. It is crucial to understand that the lender reserves the right to cancel this offer if the provided information cannot be verified.
Please note that all bankruptcies must be discharged in order to be eligible. This offer is nontransferable and is specifically available for single-family residences or owner-occupied condominiums. Please be aware that mobile homes and cooperatives are not included in this offer. It is important to note that the lender must hold a valid first lien position, and property hazard insurance is a requirement.
These are some key details to consider when evaluating this offer. It is essential to thoroughly review the terms and conditions and seek clarification from the lender regarding any specific questions or concerns you may have before proceeding with the application process.
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Open a line of credit of up to $500,000.
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Borrow from this credit line at any time over the next 10 years
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After 12 months rate will only increase to the current Prime Rate!
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The Figure Home Equity Line is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw.
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