Home equity is the net value of the portion of your home that you own outright. In other words, it is the fair market value of your home minus what you owe on your mortgage. For example, if your home is worth $100,000, and the balance remaining on your mortgage is $60,000, then your home equity is $40,000.
Home equity financing is when you borrow against your equity by using your home as loan collateral. Your property is pledged to the lender as security in case you don't pay back your loan. Borrowing against your home equity will reduce your home equity.
It is important that you consider your complete financial situation, including your other debt, to determine whether home equity financing fits within your income and budget.
Before you begin the home equity process, you should determine your exact need for home equity financing. Your exact need will help determine whether a home equity loan or a home equity line of credit work for your kind of life. Homeowners use home equity financing for a variety of different reasons, some of which may include:
Once you determine why you need home equity financing, you will need to think about the nature of your expense as well as your borrowing preferences. This will help you decide which type of home equity financing makes the most sense. Which of the following two categories does your home financing need fall into?
Contact one of our mortgage loan officers or call us at 319-286-6200 to start moving toward your home equity loan.