As property values continue to rise in most every corner of the country, homeowners are not only witnessing the increase in price but also an increase in homeowner equity. Over time, as property values rise and existing mortgage loans are gradually paid down, the amount of equity available to a homeowner grows. But how do homeowners take advantage of this newfound equity?
An equity loan is a solution. An equity loan comes in the form of a second mortgage and is based upon the current value of the property and the existing mortgage. To tap into this equity, contact your loan officer to apply. The process is very much the same as when the first mortgage was taken out but the costs are much lower.
After submitting an application for an equity loan the lender will then document the loan file and prepare it for closing. Part of this process is to determine the property’s current value with a new appraisal report. If the value for example comes in at say $300,000 and there is an existing first lien in the amount of $225,000, which leaves $75,000 in equity. Most equity loans allow homeowners to borrow up to 90 percent of the homes current value. 90 percent of $300,000 is $270,000 and considering the $225,000 first that leaves up to $50,000 available in the form of an equity loan.
Equity loans are low cost with competitive interest rates and can close quickly. If you’ve been thinking about doing some remodeling, paying for college or just having some extra cash in the bank, accessing your home equity is really very simple.