The value in your home is a benefit that you can build on a save for the future or you can tap into today with a home equity line of credit or HELOC. The following information can help you through the preparation and process to apply for a home equity loan.
Determine Your Equity
The equity in your home is going to vary based on the value of your home and home values in your area, how much you paid for your home versus what it is worth now, and how much you have paid down your existing mortgage. If you just bought your home five years ago, for example, and home prices have not increased in your area, you may not have enough equity to borrow against. However, as another example, if home values in the area have increased exponentially as they have in some areas of the country, your home's value may have increased as well.
You will need to also find out your home's value and its equity by completing a home valuation or appraisal. Your home equity loan agent will request a home appraisal to look at your home and its condition and improvements to determine how much it is worth in today's market. They will provide you with a full report detailing their evaluation, which you can use in your equity loan application.
Understand the Terms
When you apply for a home equity loan, it is important that you understand the terms of the loan. This loan will borrow against the equity in your home and can come with one of a variety of different repayment plans. Based on your loan terms, you can pay back the loan over a set period of time or you can continue to draw funds from the line of credit, which is similar to how a credit card works.
Find out from the lender what types of loan repayment plans are available and look into one that will work best with your needs and finances. With some loans, you may only be required to pay back interest on the borrowed funds for a certain period of time. Make sure you choose a repayment period that will allow you to pay back the loan in a timely manner but also make the payments affordable. The longer the repayment period is on your home equity loan, the lower the required payments will be over that period of time. Also consider any fees for the HELOC loan origination so you can calculate this into your loan costs.
Reach out to a company like LincOne Federal Credit Union to learn more.Share