What is a Home Equity Loan?
A home equity loan is when a second loan is taken out on the equity a homeowner has in the home. Equity is the difference in the actual market value of the home and the amount that the owner still owes on the mortgage. In effect, the money that was already paid towards the mortgage, the equity is turned into cash.
The money can then be used in any fashion you choose. Whether it is to completely renovate an area of the home, to plant trees to give the yard some shade and curb appeal, or to start the construction and installation of a new in-ground pool. It can even be used to cover things like medical bills or college tuition. This is also a great type of loan to consider if the home needs renovations years down the road from when it was originally purchased.
There are two different types of home equity loans available to homeowners. The first is a standard home equity loan or HEL, which is a one-time loan at a lump sum. With this type of home equity loan, fixed interest rates often accompany it.
Home Equity Line of Credit
The second type of home equity loan is a home equity line of credit or a HELOC, which is more like a credit card than an actual loan. This type of loan is great for home improvement projects. It gives the homeowner the ability to only take out what is needed for the repairs or renovations. Many will have an equity line in place for emergencies. If you are self-employed it is often used for a business line of credit, or used for short term cash flow purposes. Most home equity lines of credit tend to be interest only for ten years then convert to an amortized loan for the remaining term of 20-years.
Call First Meridian Mortgage Corporation today at 703-799-5626 to speak to one of our loan officers about your home equity loan needs in Virginia.
