When someone needs funds, they tend to take out a loan. As a homeowner, one of the most common types of loans people consider obtaining is a home equity loan.
Home equity loans are great as they provide owners with a way to receive quick emergency funds. With MaxCash, learn just how common these types of loans are.
What is a Home Equity Loan?
A home equity loan is a type of loan in which you borrow money from your homes equity. Your homes equity is determined by the difference between the market value of your home and your mortgage balance. Basically, a home equity loan is a second mortgage and your homes equity acts as collateral for a lender.
So, if we assume that your house is valued at $170,000 and you have $100,000 left to pay on your mortgage, then your homes equity is currently $70,000.
Market Value Mortgage Balance Equity
$170,000 – $100,000 = $70,000
Though, your loan will not cover 100% of your equity. You could get upwards of 80% or 90% of your equity, but that will vary lender to lender.
The Two Types of Equity Loans
If you are going to take out an equity loan then you should be aware that they come in two types:
- A fixed rate loan
- A line of credit loan
A fixed rate loan is given to a borrower in a lump sum, which is to be repaid over a set period of time. Because this type of loan is fixed, interest rates as well as monthly payments are locked into the same amount throughout the life of the loan.
A home equity line of credit (HELOC) is considered a variable-rate loan and is not given in a lump sum, but instead is used multiple times. With a HELOC, a borrower can use as much money as they want from a preset limit of funds determined by the lender. This can be quite beneficial as it lessens the temptation of using funds frivolously.
However, since HELOCs have variable rates their interest rates could change throughout the course of the loan. This means you could be paying more than you would with a fixed rate loan. Also, if you sell your house, then your equity loan must be paid off before you do.
Are you trying to find a lender to give you an equity loan, but having trouble finding the right one? Well with the help of MaxCash we can take that worry off your shoulders. MaxCash has a large network of lenders across the country and because of that we are able to find our clients the right lender in a fraction of the time it would take anyone else.
But our services don’t stop there, as we offer up our knowledge on all things loan and finance related through our blog. With our ability to find clients an affordable loan from a reputable lender, MaxCash is the best place to start when looking for funding.
What You Will Need to Apply for an Equity Loan
Applying for an equity loan will require you to provide your lender with various documents.
In order to help speed up the process, we recommend you have the following documents ready:
- The last two years of tax returns
- W2 statements
- Past few months of bank statements
- Proof of income
- Proof of homeowner’s insurance
- Recent paystubs
It’s good to have these documents on hand before you apply, as it will help from having to scramble and find everything last minute.
The Time it Will Take to Pay Off an Equity Loan
When you take out any loan, it’s important to know how long you will have to pay off that debt. When it comes to an equity loan, terms can range from 5 to 15 years. Because of such drastic differences in loan terms, we recommend that you consider your finances to determine which loan length is most convenient for you.
So, if you feel that you will need more than 5 years to pay off your debt, it’s best to go with a fixed rate loan. Or if you feel financially secure enough, use a variable interest rate loan.
If you are considering using MaxCash to help secure a home equity loan, check out our informational page on home equity loans to learn more. If you would like to learn more about our methods, find out more about us on our website.
On our website, you can read how we don’t charge our clients, how we help find clients a loan, or how we strive to remain transparent throughout the lending process.
Though, if after all that you still remained unconvinced, then try contacting one of our representatives yourself by calling (833) 207-9052 or writing an email to firstname.lastname@example.org.