If you are a homeowner in Milton, you may have heard that you can access cash from your home equity, through something called a home equity loan. What you may not know however is what a home equity loan is or how it works.
What is a home equity loan?
A home equity loan is another name for a second mortgage. It is a loan against your home equity (most lenders allow you to borrow up to 80%, but some go as high as 90%). Usually, the interest on a home equity loan is higher than the interest on your first mortgage, but since it doesn’t require you to break your first mortgage (like refinancing does), you don’t have to worry about paying a financial penalty to your lender.
How does a home equity loan work?
After you get approved for a home equity loan, you will receive a lump sum of cash that you may use for any purpose you like. Some Milton homeowners use the cash from their home equity loans to pay for home renovations or to start a business while others use it to consolidate their higher interest debt. The choice is really up to you.
Once you have taken the cash, it is important to make your regular payments in full and on time. Since the loan uses your home equity as collateral, you could risk losing your home if you fail to make payments.
At the end of the term of the loan, you will have the option to either pay off the entire loan in full or renew it.
What’s the difference between a home equity loan and a home equity line of credit?
Because the names are so similar, people often use these terms interchangeably when in fact they are two different things. A home equity loan as we have stated is essentially a second mortgage. A home equity line of credit is a revolving loan that you can draw from and payback as often as you like as long as you do not exceed the approved amount (similar to a personal line of credit or credit card with the distinction that the loan is secured by your home equity).
How can I get a home equity loan in Milton?
If you are a Milton homeowner who is in need of a home equity loan, I can help. Contact us today to set up an appointment.