Home Equity Loan

Benefits and Eligibility

• Get a lump sum of cash to use how you need, immediately.
• Home Equity Loans typically have lower interest rates than personal loans or credit cards because they are secured by the value in your home.
• Rely on a secure, fixed-rate monthly payment.
• Keep your current mortgage rate and terms.
• Requires some available equity in your home.
• Not available in all states.

How does a Home Equity Loan work?

A Home Equity Loan, also known as a Second Mortgage or Closed-End Second, is a type of mortgage that lets you borrow against the equity you have built in your home. How you use your funds is up to you, but some common uses are to make home improvements, pay for large expenses such as college tuition, or to consolidate debt.

When you take out a home equity loan, the funds are generally dispersed in a lump sum and paid back in regular fixed installments over a predetermined amount of time (your term). 

Once the home equity loan is finalized, the lender gives you the entire borrowed amount all at once. Then you will make monthly payments, which include both the principal of the home equity loan, as well as interest. 
Getting a home equity loan does not affect your current mortgage. You'll keep the same rate, terms, and payments with your current mortgage lender, and you'll have a second mortgage (your home equity loan) payment to make.

Who should use a Home Equity Loan?

Homeowners who have paid down their mortgage enough to build equity and need a large lump sum of cash might consider a home equity loan. If you already have a good rate and do not want to refinance your home, a home equity loan could be a good option, as your original mortgage and its interest rate will stay the same.

If you're not sure a Home Equity Loan is right for you, there are other options for tapping into your home's equity.  A Home Equity Line of Credit is another type of second mortgage that lets you borrow against your home's equity as needed over time, similar to a credit card. A cash-out refinance allows you to refinance your current mortgage to a higher amount, allowing you to receive the difference.