What is a home equity loan?
A. A home equity loan is a financial product that allows a borrower to use the market value of a home as collateral for a loan. Loans secured by real estate generally are considered safer by lenders, resulting in lower interest rates than for other types of loans. Equity is easily calculated by subtracting the amount owed on the home from the current market value. For example, if a house with a market value of $100,000 has an outstanding mortgage of $30,000, the homeowner has equity of $70,000. If there were no mortgage or other type of lien on the house, the homeowner would have $100,000 in equity. Q.
An equity loan is secured by the equity you have in your homestead. Your “equity” is the value of your homestead minus any outstanding debt already secured by your homestead. In Texas we are limited to 80% of the value, not 100% like some states. A home equity loan is a financial product that allows a borrower to use the market value of a home as collateral for a loan. Loans secured by real estate generally are considered safer by lenders, resulting in lower interest rates than for other types of loans. Equity is easily calculated by subtracting the amount owed on the home from the current market value. For example, if a house with a market value of $100,000 has an outstanding mortgage of $30,000, the homeowner has equity of $70,000. If there were no mortgage or other type of lien on the house, the homeowner would have $100,000 in equity. Example: $100,000 = Value of your homestead $ 60,000 = Mortgage (loan to purchase home) $ 40,000 = Equity in your homestead Texas Example: $100,000 =
A home equity loan is a loan that uses your home as collateral. Your home equity is the part of your home that you actually own and this is the guarantee for your loan. Your home equity is calculated by taking the current value of your home and subtracting your first mortgage. For example, if your home is worth $150, 000 and you have a $100,000 mortgage, you have $50,000 of equity in your home. A home equity loan allows you to borrow money using your equity of $50,000 for the loan. A home equity loan, often called a second mortgage, reduces your equity or ownership in your home. Since your home guarantees your loan, if you default on the payments, you can lose your home.
The equity in your home is a valuable asset you may not be aware of. Your home has a particular value. This could be what you bought it for, but in most instances it will be higher because home values rise. Your home could have appreciated tens of thousands of dollars within just a few years! If you have no mortgage or liens on your house, the full value of your home is its equity. But in most cases, people will have a mortgage on their home. So their equity is the value of the home minus the amount owed on their mortgage. Each time they make their mortgage payment, they gain a little more equity in their home. You can get a cash loan against the equity in your home. Since this is considered a secured loan, you can get excellent interest rates that are better than those of personal loan programs. Home equity loans can be used for anything, from home improvements to taking a vacation.
