WHAT IS HOME EQUITY?
Equity is the amount of your home that you own. For example, say your home is valued at $200,000 when you buy it. With a $40,000 down payment (20%), that is what you own when you move in. Every payment you make increases what you own.
While living in your home, if the value increases (let’s say to $250,000) that amount is then added to your equity. However, this increase does not affect your monthly mortgage payment.
If you decide to sell your home, you can use the equity that you have towards a new home.
WHAT IS A HOME EQUITY LOAN?
A home equity loan is when you borrow money using your home as collateral.
There are two main types of loans. First, there is a fixed rate 2nd mortgage. This loan is the better option when you know exactly how much money you need as it is paid in a lump sum. The second is a home equity line of credit (or a HELOC) which allows you to pull out funds as needed, similar to a credit card.
WHAT CAN THIS LOAN BE USED FOR?
There are several reasons why people choose these types loans, the main one being for home renovation. They can also be used for bigger ticket items such as student loans, cars, etc. The money you borrow through HELOCs features a lower interest rate while a 2nd mortgage features a fixed rate.
If you interested in learning more about a fixed rate 2nd mortgage or HELOCs, our advisors are here to help. They can walk you through the process and find the option that works best for you. To contact an advisor, you can find more information HERE and HERE. If you're ready to apply now, check out our online application form.