How To Get A Home Equity Loan
Home owners may wonder how to get a home equity loan. Home equity loans are also known as second mortgages. The equity in a house is the portion of the value of the house that the homeowner actually owns. For example a $500,000 house with a $300,000 mortgage has $200,000 worth of equity. A home equity loan is money borrowed from a lender against the $200,000 portion.
- Search around for lending institutions. Local credit unions are a good place to start.
- Usually there are up front application fees. These cover the financial paperwork and other costs such as a credit check.
- The financial institution will initiate an appraisal. This establishes what your house is worth. The appraisal process is usually only a couple of hours once the appraiser arrives at your home.
- You may be asked to provide verification of homeowners insurance. Your home equity loan can be with the same lender as your first mortgage or not. Loans with your existing mortgage lender may require less paperwork and verification since they already have your information.
- Once the value is established, the lender will determine how much they will loan. The loan won't be for the full equity left in the house, but some percentage under that.
Closing the home equity loan is similar to closing on a first mortgage. You may want a real-estate lawyer to help with the closing paperwork if you don't feel comfortable on your own.
There are many lending institutions with various products available, research your options well before making a choice on a home equity loan.