How to Get a Home Equity Loan
One of the most popular home loan types, a home equity line of credit (HELOC) allows individuals to borrow up to 85 percent of their home's current value. The maximum size for a HELOC is $375,000. This type offers much greater flexibility than a mortgage because interest rates are based on the prime rate. It also reduces the risk that comes with purchasing a home because it isn't tied to any specific date on which you need to pay off your mortgage balance.
Here's how home equity loans work: You make a lump sum of money available through a line of credit. The amount granted is usually the down payment plus closing costs paid by the seller. You can then use this money for any purpose, such as paying off your mortgage early or using it to purchase another piece of real estate in your neighborhood or across town. They are a great way to get a buyer-financed home in some of the most desirable areas of the country and to help with financial planning.
Some other benefits of home equity loans include:
- Banks are willing to offer a lower interest rate for homeowners than they are for renters, allowing you to build equity faster.
- You can qualify for a lower interest rate on your HELOC if you have less debt or better credit scores than other borrowers in your area.
- You get an annual percentage rate that is fixed throughout the term of your loan and not tied to fluctuations in the prime rate.
- Borrowers can use home equity loans for more than just home renovation projects. They can be used to consolidate debt or as investments in properties.
While you can get a home equity loan from pretty much any bank, there are certain advantages to borrowing from a community bank or credit union over a megabank. Community banks and credit unions are typically smaller and don't have the same overhead as their megabank counterparts. They also tend to lend more often, which helps to keep their costs lower. And when you find a community bank or credit union that is willing to work with you, you can use them as resources for securing other financial and personal services.
Bundlefi can connect you with a credit union or community bank in your area, to help you get the process of acquiring a home equity loan started. Just visit www.bundlefi.com to find your new banking partner today.