If you are a homeowner and are considering borrowing money from your bank for a specific need, then a home equity loan could be the answer for you. Home equity loans allow you to tap into the money you have invested in your home for a low-interest way of covering large expenses. Home equity loans offer better interest rates than credit cards and are a good example of making your investments—like your home—work for you. Should you consider a home equity loan? Here is what you need to know.
What exactly is a home equity loan?
When you make payments on your mortgage loan and chip away at the principal, then you are building equity in your home. Equity is the amount of money you have invested in your home minus the balance of your mortgage loan. For example, if your home loan was for $200,000, and the remaining balance is $150,000, then you have $50,000 worth of equity in your home. Home equity loans allow you to tap into this $50,000 investment you have made in your home to finance expenses you have.
Who should consider a home equity loan?
Home equity loans are ideal for homeowners who are making a big purchase. They are often recommended for use with home improvement projects, but home equity loans can be used in much the same way personal loans can. If you have a specific loan need, your bank can help you determine which method of financing your purchase makes the most sense.
What happens to my mortgage with a home equity loan?
A home equity loan is similar to a second mortgage. In essence, the money you owe on your home will increase in the amount of the money you borrow plus any fee for the loan. Since a home equity loan is secured with your house as collateral, work with your bank to ensure that you are borrowing wisely.
Mountain Valley Bank is committed to helping customers achieve their financial goals with a range of banking products with competitive rates and flexible terms. For more information about this bank in Steamboat Springs, CO, call (970) 870-6550.