Home Equity Loans

Most homeowners have a sizable amount of equity in their home – houses, after all, are a store of value as well as a place to live – and many decide to withdraw some of this value in the form of a home equity loan. A home equity loan allows you to tap your equity for the things that are important to you – college tuition, home renos, medical expenses, even the costs associated with an aging parent. At LowestRates.com we have access to the leading home equity lenders in all 50 states, so you can be sure you’re getting the best deal no matter where you live!

By borrowing against the equity in your home, you can access funds when you need them most – all you have to do is pay the money back to your lender over a fixed schedule, usually at fixed interest rates. Your lender will assess how much money you can take out in a home equity loan by determining the value of your property and the value of the claims(such as a mortgage) against it. Usually you will be eligible for some percentage of the difference. Many banks use the 80 percent rule – that is, they allow borrowers to withdraw up to 80 percent of the available equity in their home. To calculate what this amount would be for you, simply take the current value of your home and subtract the current value of your mortgage. This sum is the total amount of equity that you have in your home. From here you simply multiply by .8 to get 80 percent of whatever that number is. Make the calculation and presto – you’ll have a good idea of how large your home equity loan could be based on the 80 percent rule.

Unlike a revolving home equity line of credit, or HELOC, a home equity loan is a set sum of money to be paid back over a predetermined period. Rates on home equity loans tend to be fixed rather than floating, meaning you’ll always have the same predictable payment.

You will find that interest rates on home equity loans are higher than on standard mortgages, however. The reason you’ll have to pay a slightly higher interest rate is because a home equity loan lacks the so-called “senior status” of a primary mortgage, and carries more risk for the lender. Home equity loans, in the eyes of the law, are almost always “subordinate” to the primary mortgage on a house, meaning the primary mortgage gets paid back first in the event of a default.

You should also know that home equity loans have certain tax implications as well – the last thing you want to do is get in trouble with Uncle Sam because you tapped the equity in your home. The IRS views mortgage debt as falling into two categories – home acquisition debt and home equity debt. Home acquisition debt is debt related to the purchase or improvment of a home, while the home equity debt category applies to debts spent on anything else other than your home. It’s an important distinction, because acquistion debt interest is tax deductible up to a threshold of one millions dollars. Equity debt interest may only by deducted up to one hundred thousand dollars. There are a variety of other tax implications as well, so you would be well served to consult your tax advisor before proceeding with your home equity loan.

Of course, you should not take out a home equity loan for frivolous reasons. The money must eventually be paid back with interest, so you should only apply for the minimum amount of money you need, rather than the maximum amount that the bank will lend to you. Always read over the fine print and consult with a professional financial advisor before proceeding with your home loan – you want to make sure you’re getting the right loan for you on the very best terms possible!

Save yourself time and money by comparing home equity loans right here at LowestRates.com! We’ll find you the best home equity loan offers in your state – instantly!