A home-equity loan is a credit option that allows homeowners to access the equity in their homes by taking out a second loan secured by the property.
Home equity loans offer borrowers a choice for almost any purpose, from debt consolidation to home renovations. Below are some of the most notable advantages of these types of loans.
1. Low interest rates.
Although the interest rate on a home-equity loan will likely be higher than the rate charged on the first mortgage, these loans usually carry rates that are much lower than credit cards or personal loans.
2. Quick access to cash.
In many cases, homeowners are able to take out home-equity loans relatively quickly. Depending on the amount of equity in the home, this can allow homeowners to access a significant amount of cash without much effort.
3. Fixed interest rates.
The majority of homeowners will be able to take out a home-equity loan with a fixed interest rate, which means that the rate will remain the same over time.
This makes the loan more stable and predictable, preventing borrowers from dealing with unexpected rate fluctuations.
4. Flexible repayment terms.
Borrowers are typically required to make minimum monthly payments on home-equity loans. However, these loans usually allow borrowers to pay more than the minimum amount without facing any pre-payment penalties, which saves the borrower interest.
The amount of money a borrower can obtain through a home equity loan varies and will depend on several factors, including the amount of equity in the borrower's property, the borrower's income and the borrower's credit rating.