Home Equity Loan – How Much Can I Borrow?
How Many Questions are There?
What exactly is a home equity loan? How do I find the lowest rates for my home equity loan? How much can I borrow against my home equity anyway? These are the question many people are asking themselves while considering applying for it for one reason or another.
How Do They Work?
So what is home equity loan? This is another name for a revolving line of credit that you can get from different lending companies against the equity of your largest and most important asset – your house. It is fairly easy to get this type of credit due to number of reasons. You do not even necessarily need to have an ideal credit history.
A revolving line of credit is like a giant cash credit card. It’s a loan that has a preset limit, let’s say $100,000. Once it’s established you can use the money for anything you like. Typically, you only have to make monthly interest only repayments that are calculated on the balance in the account.
No Repayments Required
Some home equity loans don’t even require you to make any repayments at all. These are called capitalised interest home equity loans. They allow you to capitalise the balance and the accumulated interest all the way up to the approved limit.
We suggest that unless you have a very good reason for having one of these and on top of that you’re a good money manager you stay away from one of these. They can get the unwary into a lot of financial trouble when it comes to paying it off.
When you are applying for a home equity loan you must bear in mind that as any other type of credit you will need to eventually repay this one back, plus any accumulated interest fees.
How Do You Get the Best Rate?
This brings us to the next issue: Why is it so important to find the lowest rates for your home equity loan.
Since there are so many lenders ready to give you this type of credit, you are in a favourable position of negotiating a lower interest rate on your loan. First of all you would have to do your homework: make a list of lenders. Check out their rates (on their websites or call their representatives) and figure out which company might give you the lowest interest rates.
How Much Will They Give Me?
Many people might wonder just how much money they can get on their home equity. This is pretty simple: take the amount of money your home is worth, subtract whatever sum you still owe on your mortgage. Whatever result you get would be the amount of money you may borrow on your home equity. For example, say your home is worth $600,000. You still need to pay $270,000 back to your bank. That means you may borrow $330,000.