What is a Home Equity Loan and How Does it Work?
A home equity loan is a revolving line of credit secured by the equity in your home. Home equity loans can be a convenient and flexible way to borrow money from your home on the cheap when done right. (It’s a lot less costly than carrying a balance on your credit card.)
In order to get the most out of your home equity loan, you want to use the borrowed funds on something that’s likely to help improve your financial wellbeing in the future. You’ll also want a plan in place to pay it back in a reasonable period of time. (It can be easy to fall into the trap of only paying the interest, but you’ll literally find yourself in the same place several months or years later.)
Just how much equity can you borrow from the equity in your home using a home equity loan? Currently, you’re able to borrow up to 65% of the appraised value of your home. But keep in mind that your mortgage and home equity loan together can’t exceed over 80% of the value of your home.