Home Equity Loan 101: How to Get a Home Equity Loan
Since recent trends and changes in the housing market, there has been a sizeable change in the home equity loan market pertaining to interest rates. Favouring applicants, home equity loans now start at as low as 2.31% depending on the applicant’s situation and home equity.
If you’ve decided to apply for a home equity loan but not sure where to start, let the below be your guide. There are 4 main steps to applying for a home equity loan:
- Determine how much you want to borrow
- Calculate the equity in your home
- Figure out how much you can borrow
- Get quotes from lenders
1. Determine How Much You Want To Borrow
Have a number in mind on how much you want to borrow. Remember that the loan can be used for multiple purposes, not just one. If you want to start a renovation project on your house but also want to consolidate a few loans, be sure to include the sum of those amounts on your application.
2. Calculate How Much Home Equity You Have
While you can leave it to the lender to calculate this for you, it’s always beneficial to know just how much asset you hold. To figure out the amount of equity you have in your home, take the market value of your home then subtract it by your current outstanding mortgage.
For example, say your home’s value has been appraised at $300,000, and you owe $150,000 on your mortgage (and any other debts secured by your house). This means you’d have $150,000 in equity: $300,000 (home value) – $150,000 (mortgage balance) = $150,000 (equity).
3. Figure Out How Much You Can Borrow
Most lenders will only let you take out a loan for up to 85% of your home’s equity. If you have $150,000 in equity, that means the maximum you could borrow would be $127,500. However, this varies across institutions. If you’re unsure, ask the lender for a quote.
4. Get Interest Rates From A Trusted Lender
Now all there is left to do is to apply for a loan. Ask a few friends and look around online for home equity loan lenders. Lenders can vary in their experience, amount of interest offered, and the application fees they charge. When asking for a quote, also ask for the amount involved in setting up the loan.
If you have further questions on how a home equity loan works or how to apply for one, our specialists are always ready to help. Leap Financial also offers home equity loans, so if you’re looking for a trusted lender with some of the best rates in the market, look no further than here.