Home Equity Loans

These loans allow you to access the equity in your home

A home equity loan is one where the borrower uses their home as collateral for the loan. A borrower usually has an existing mortgage on their home, which in some cases, may have previously been paid off.

The loan creates a lien against the borrower’s house, and reduces the actual home equity. Usually, the loan can reach, but not exceed 100% of the house’s value.

In order to get a home equity loan however, the borrower must usually have good to excellent credit history, and reasonable loan-to-value and combined loan-to-value ratios.

Home equity loans are most commonly second position liens (second trust deed) after the original mortgage holder, although they can be held in first or, less commonly, third position.

Very often a home equity loan is used for debt consolidation of other, higher-interest debt. This loan consolidation can save the borrower money in the long run in interest payments.

If the rate is less than an existing mortgage, a Home Equity Loan may be used as an indirect refinance method. Check interest rates.

Most home equity loans have fees attached, so check carefully what these are before you take one out. Some of these fees are:

  • Appraisal fees
  • Originator fees
  • Title fees
  • Stamp duties
  • Arrangement fees
  • Closing fees
  • Early pay-off fee

Check out our home equity loan calculator to see how much such a loan will cost you.