Frequently Asked Questions About Home Equity Mortgage Loans

Here are the answers to the most commonly asked questions about home equity mortgage loans.

What are home equity mortgage loans?

Home equity mortgage loans are a way to borrow money using the equity in your home. Home equity refers to the difference between your home's appraised value and the outstanding balance on your mortgage. Lenders allow you to use this equity as collateral, which makes home equity loans a secured debt.

What happens if I fall behind on my payments on a home equity loan?

A home equity mortgage loan uses your home as collateral, so you could risk losing it if you default on loan. As mentioned before, a home equity loan is a secured loan, which means the lender has the right to seize the property attached to the loan if you fail to pay on time. If you are not 100% sure you can manage the payments, it is not worth the risk of losing your home.

Do home equity mortgage loans have high interest rates?

No, home equity loans have some of the lowest interest rates of all loans, especially when compared to unsecured loans. This is because your house serves as collateral, which reduces the risk the lender is taking in lending you money. Another benefit is that most borrowers can deduct the interest expense on their home equity loans on their income taxes.

Can I get a home equity loan from you?

Though you can use our site to connect with lenders that offer home equity mortgage loans, we ourselves do not actually provide loans. We are a free matching service, not a lender. We're here to provide you with free, no-obligation quotes on home equity loans. We leave it up to you to choose a lender and then apply for a loan with that lender. Find out more about how it works on its own page with greater detail.

How large of a home equity loan can I get?

Some homeowners mistakenly think that lenders will automatically give them home equity mortgage loans against 100% of their home's value. In other words, they expect to be able to borrow every dollar of the equity they have. In reality, this rarely happens because it's too risky for the lender. A more practical way to estimate the amount of your home equity loan is to take 80% of your home's current appraised value and then subtract all outstanding debts against it. This will be a more accurate estimate of the loan you actually get.

Should I get a home equity loan or a HELOC?

A home equity line of credit (HELOC) has a variable interest rate and allows you to pay it back as you borrow, much like a credit card. It is a revolving debt that lets you borrow up to the credit limit for which you were approved upon application. HELOCs come with variable interest rates, so your payments and rates will fluctuate. HELOCs are best for indefinite, recurring expenses. A home equity mortgage loan, on the other hand, gives you the entire amount of the loan at one time, which you then repay in monthly installments. Your payments and interest rate will never change over the course of the loan's term.