What is a Home Equity Loan Line of Credit?

If you’re asking the question “what is a home equity loan” you have probably heard the term and wonder if you can take advantage of this creative financing option. Take a minute to find out what is a home equity loan and how this loan process works.

What is a home equity loan? A home equity loan is an additional loan against the value of your home. The loan to value of your home is the amount you owe against the home in comparison to the actual market value of the home. If you have paid on your home for a few years, you have probably lowered your loan to value ratio. That means that the equity has increased. So what is a home equity loan? The equity is simply the amount the house is worth minus the loan amount. If you have sufficient equity you may qualify for a home equity loan.

What is a home equity loan used for? You can use the proceeds from your home equity loan for anything. One of the most common reasons people take out a home equity loan is to pay off other debts that have high interest rates, such as credit cards. You may also take out a home equity loan for home improvements, repairs or renovations.

What is a home equity loan application process? The process for applying for a home equity loan is very similar to applying for a traditional home loan. You may have to provide an appraisal – a professional opinion of the market value of your home – so the lender can compare the value with the current loan. After it’s determined what equity you have in your home, if any, the loan is processed like any other loan.

What is a home equity loan line of credit? If you have equity in your home, you may be granted a home equity line of credit instead of a home equity loan. That means that you have access to a specific amount of money based on the amount of equity you have in your home. You only pay interest on the amount of that money you use, and you’re under no obligation to use it all.

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