When & How to Borrow From Your Home's Equity

Posted by Gary Hall on Dec 19, 2017 9:43:00 AM
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Real estate sale, home savings, loans market concept. Housing industry mortgage plan and residential tax saving strategy. Piggy bank isolated outside home on background. Focus on piggybank. Homeowner .jpegThe equity you build in your home stands as collateral for a home equity loan or line of credit and both are considered secured. The interest rates for a home equity are typically lower than a credit card, a type of loan that is unsecured. When looking at your home equity from a when and how perspective, let’s break this up a bit.

When to Borrow from Your Home’s Equity

When to borrow from your home’s equity can be impacted by a number of factors including how long you have owned your home, current interest rates, and current economic indicators regarding potential appreciation of your home’s value, will most likely lead the list.

Nationally, home prices have steadily gone up since the financial crash in 2009. As a result, millions of people are borrowing against the equity they've built up in their homes since the housing crisis.

According to data from a 2016 Freddie Mac study, 41 percent of consumers in the second quarter of 2016 took out mortgages that involved some form of cash-out refinance, or borrowing against their home’s equity. In all, homeowners borrowed more than $13 billion of their home equity between April and June last year. 

So that makes — when — pretty clear.  This is a good time to use your home’s equity.  Interest rates are low. Housing prices continue to appreciate in most markets in Michigan. The unemployment rate in the state is the lowest in 20 years.

So now let’s move to — How.

How to Borrow from Your Home’s Equity

A good place to start is sitting down with our loan professionals at ChoiceOne Bank.  You need to understand the process, what it will take to finalize your loan and the obligations it will bring. Getting your loan will depend on the appraised value of your home.

At ChoiceOne Bank, we can walk you through the process, explain the difference between a home equity loan (HEL), and home equity line of credit loan (HELOC), our current rates, maximum amount you can borrow, and the terms of the loan.

Working with a ChoiceOne Bank loan officer, you will start the process to get qualified for your home equity line of credit or home equity loan in three steps:

  • Check your credit. A good credit score usually makes it easier to qualify for home equity financing.
  • Check your available equity. Add the amount you want to borrow to the amount you already owe on your home, and make sure the total isn't more than the allowable loan amount of your home's value. An appraisal will most likely be needed to qualify.
  • Check your debt. We will need to know current obligations and how the additional obligations of your home equity loan will impact your debt ratio.

At the time your loan is final and the paperwork signed, ChoiceOne Bank will explain how your home equity loan works differently from traditional loans.

A home equity loan will be paid out in a lump sum, for a specific period of time with a fixed rate. A home equity line of credit acts as a revolving line of credit. This means that ChoiceOne will approve you to borrow up to a certain amount of your home’s value, with a variable interest rate charged.

Call our Customer Service Center today at 888.775.6687 or visit any of our convenient branch locations to speak to a loan officer near you.

Find a convenient location here: https://www.choiceone.com/contact-and-locations/.

You can also apply online at https://www.choiceone.com/personal/borrowing/

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*Loans are subject to credit review and approval. Home Equity Lines of Credit are available for well qualified applicants for loans of $5,000 or greater. No annual fee for first year, then $50 per year. Processing fee of $199 may be applicable. Rate not to exceed 18.00%. Consult a tax advisor regarding the deductibility of interest.

Topics: HELOC