Do you own your home? Do you have a kitchen or bathroom that you have always wanted to remodel but have not had the savings to get the project started? A home equity loan may be for you.
A home equity loan is a loan in which the borrower uses the equity of their house as collateral. This loan allows you to borrow money based on the value of your home and the equity you have in it. Most home equity loans come with a fixed rate, and the loan repayment period is typically between 10 and 30 years.
A home equity loan is normally best suited for folks who need money to pay for a large-ticket item, such as a home renovation project. In terms of dollar value, loans can range from $10,000 on the lower side to well over $100,000.
After your loan closes, the entire amount of your loan will be deposited into your account.
Home Equity Line of Credit
A home equity line of credit (HELOC) uses the equity you have in your home as security for a home equity line of credit, a type of revolving credit. Many homeowners opt for a HELOC because they can often secure lower interest rates than other types of loans, such as personal loan from a bank, which is unsecured.
Once approved for a HELOC, you use the funds for individual purchases as needed up to an approved amount, roughly in the same manner as a credit card. With a HELOC, you do not need to borrow the full amount of the loan, and the available credit is replenished as you pay it back. In fact, you could pay back the loan in full during the draw period, re-borrow the total amount, and pay it back again. But it differs from a credit card in that it uses the equity in your home as collateral.
The repayment period on a HELOC is usually between 10-20 years while the draw period lasts about ten years. HELOC loans can have annual fees associated with them, and interest rates on a HELOC’s repayment period are adjustable. You pay interest only on what you actually borrow from the available loan, and you usually don’t have to begin repaying the loan until after the draw period closes.
Home equity lines of credit are best for people who expect to need varying amounts of cash over time—for example, to start a business. If you do not need to borrow as much as a home equity loan requires, you might consider a HELOC and borrow only what you need instead.
Do you think a HELOC could be a good fit to help renovate your home? Call us today to learn more and experience firsthand the dedicated, personalized customer service and undivided attention that RLG has to offer!