Many people take out loans every year, and with so many different loan products around there is something to suit most needs. When selecting a loan product it is important to find something that offers the lowest rate of interest and the most affordable repayments. For homeowners that have equity in their properties the obvious choice is a home equity loan, which offers affordable borrowing and very low interest rates.
A home equity loan is based on the amount of equity you have in your property. The equity in your property can be calculated by deducting the outstanding mortgage on your home from the market value of your home – the remaining balance is the equity, which is what you would have left over in the event that you sold you property at market value and repaid your outstanding mortgage. A home equity loan enables you to unlock that equity and get the money you need without having to actually sell your home.
With a home equity loan the amount you can borrow is determined by the amount of equity you have tied up in your property. Some lenders will let you borrow a certain percentage of your equity, such as 75%. Others will give you a home equity loan to the full value of your equity – in other words they will allow you to borrow 100% of your equity. Some lenders even offer a home equity loan that gives you a certain percentage in addition to your available equity, such as a 125% home equity loan.
With a home equity loan you can get the things you want by using the capital that is tied up in your home, which means that you won’t have to pay out on expensive unsecured loans or credit cards – you can simply make the most of the asset you already have.