What Is Home Equity? 9 Frequently Asked Questions
When it comes to getting the most out of their homes, many homeowners are not aware of all the possible ways to leverage ownership to benefit their finances. Home equity loans can help you do just that. In this article, we answer your questions like, "What is home equity?" and more! Read on to learn how homeownership can help your finances.
1. What is home equity?
Home equity is the portion of your home's current value you have already paid. Equity increases as you make payments on your mortgage, invest in home improvements or experience an increase in property value.
2. How much equity do I have in my home?
Your equity equals the appraised value of your home minus any existing obligations on the property (your mortgage balance). If your home is valued at $300,000, and you owe $150,000 on a mortgage, then you have $150,000 in equity.
3. Are there different types of home equity loans?
Yes, there are home equity loans (with which the borrower receives the proceeds in a lump sum) and home equity lines of credit, or HELOC (proceeds from which the borrower uses as needed).
4. How do home equity loans work?
A home equity loan is structured like a normal mortgage with regular monthly payments. A HELOC is a revolving credit line and works more like a credit card, with the borrower making payments only on the current balance.
5. How much can I get?
In the state of Texas, you might qualify for up to 80% of your home value.
6. How much does it cost?
These loans typically feature fixed interest rates, low closing costs with no origination fee and no early payment penalties.
7. What can I use home equity loan proceeds for?
There are no limitations regarding the use of proceeds. Pay for tuition, home repairs, a car, medical bills or debt consolidation.
8. Can I use a second home or investment property?
Home equity loans are only available on a borrower's primary residence.
9. How long does it take to get a home equity loan?
While all loans requests are different, you should allow approximately five weeks for the application, approval, processing & funding to take place. You will receive a loan estimate within three days of your lender’s receipt of a borrower's completed application package. The loan application package does include the completed, signed & dated loan application along with supporting financial documentation and terms of request. At ACU, we will contact you very soon after receiving your inquiry to assist in the process and keep you informed. Texas regulations require a 12-day waiting period before the loan can be closed, along with a three day waiting period once the closing disclosure has been issued. After the loan is closed, borrowers have a three-day right of rescission before the loan can be funded. At ACU, we work hard to get every approved loan funded in as short a time as possible, AND your lender is available during the process for questions.
Home Equity Loans with America's Credit Union
Have more home equity questions? Visit with a mortgage lender at America's Credit Union about how our flexible loan terms and personalized lending approach can help you get the most out of your home. With no application fee, applying is risk-free, plus we service our loans in-house. Email us at firstname.lastname@example.org today.
- Weintraub, E. (2018, January 27). Is a Loan Estimate the Same Thing as a Good Faith Estimate? Retrieved April 04, 2018, from https://www.thebalance.com/compare-good-faith-estimate-1798461
- TEXAS OFFICE of CONSUMER CREDIT COMMISSIONER. (2018). RESIDENTIAL MORTGAGE LOAN ORIGINATORS: ADVISORY BULLETINS & DISCLOSURES. Retrieved April 04, 2018, from http://occc.texas.gov/industry/RMLOs/bulletins-disclosures
- Investopedia Staff. (2017, December 18). Home Equity. Retrieved April 04, 2018, from https://www.investopedia.com/terms/h/home_equity.asp
- Consumer Financial Protection Bureau. (2017, September 25). How long do I have to rescind? When does the right of rescission start? Retrieved April 04, 2018, from https://www.consumerfinance.gov/ask-cfpb/how-long-do-i-have-to-rescind-when-does-the-right-of-rescission-start-en-187/