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Home equity loan
Do you need to tap into
your homes equity to pay for a home remodeling project or to pay off a
credit card? A home equity loan is a fixed or adjustable rate loan that
is secured by the equity in your home. With a home equity loan, you borrow a lump
sum of money to be paid back monthly over a set time frame, much like
your first mortgage. The terms home equity loan and second mortgage are often used
interchangeably.
The process for a home
equity loan is similar to your first mortgage. The closing costs (often
2-3 percent of the loan amount) are usually lower and, although the
interest rate is higher on a home equity loan, the interest paid is tax
deductible.
To qualify for second
mortgage, your credit must be in good standing and you must be able to
document your income. An appraisal will be required on your home to
determine the home's market value.
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