A home equity based loan is an option for people that want to use the equity on their home to get a loan.
The Equity is the home owner’s interest in a home. It is a type of the second mortgage. It will increase when the value of the property increases. In simple words, it is the portion of the home that you have paid off; it is your stake in that home as compared to the lenders.
The loan allows you to borrow against your home’s value. It’s the difference between your home’s current market value and the mortgage balance. It is a valuable asset for many homeowners.
How does it work?
In-home equity loans, the qualification process is much easier because you are offering your home as collateral. The loan gives you access to a huge amount of money.
Your home equity increases in several ways, such as:
- The home equity will increase when the value of the property rises.
- It increases when specific improvements are made in the property.
- Finally, when you make the mortgage payments, the home equity will increase.
Types of home equity loans:
There are two types of home equity loans. In both types of loans, the only difference is the receiving of the cash. The two types of loans are as follow:
Home equity loans:
When you get qualified for the home equity loan, the lender will pay a single lump sum. As soon as you get the loan, you start to repay it at a fixed rate. You have to pay it every month till the time period you have applied.
Home equity line of credit:
It enables you to withdraw the funds when necessary. It is just like a credit card. This loan is feasible for minor expenditures such as paying school fees and home renovations etc.
Pros of Equity loans:
A home equity loan is useful for you when you need a large sum of money. They have several benefits. Some of them are listed below:
Low-interest rates:
Home equity loans have a low-interest rate as compared to personal loans and credit cards. Low-interest rates mean improved cash flow. Ultimately, you are the one getting the most benefit out of this loan.
Tax deduction benefits:
If you use the loan to improve or renovate your home, then you can claim a tax deduction. It was stated under the tax cut and job act law.
Cons of Equity loans:
Equity loans also have some disadvantages, and they are as follow:
You can lose your home:
If you fail to make your payments, you will lose your home. In this type of loan, your home is the collateral, so you are at a greater risk of losing it if you are unable to pay the amount.
Use the money for home use only:
You cannot misuse the loan money. It is meant to be used for the home purpose only. You can use it for home renovation and improving the infrastructure of the house etc. It’s for your benefit because it will pay you back. Therefore, you need to stick to that.
We work with one of the best Lenders when it comes to Equity Based Loans: 24Hr Fast Funding CapitaL
- Approval Speed: 24-48 hrs
- Factor rate: 1.09 -1.49 (Terms: 3-18 months) Factor rate means the person will pay back the loan multiply by the factor rate.
- Repayment: daily/weekly
- Qualifications:
Personal Credit Score above 500
Own Equity on a Home.
You can Apply for a Fix and Flip Loan on Here: Equity Based Loan Application