Home equity is one of the most versatile and valuable financial tools that one can have at their disposal. To properly use it, and avoid it working against you, a comprehensive understanding of home equity is required. When trying to determine what an appropriate rate is for a home equity loan in Maryland, you must be able to quantify the factors that go into creating these rates. To begin, we will look into what exactly home equity is so that comprehension may be had when breaking down how home equity loan rates in Maryland work.
What is Home Equity?
In short, home equity is the difference between the current market value of your home and the balance remaining on your mortgage. This means that as you make your mortgage payments, the equity of your home increases. Home equity can also increase if the value of your home increases. The true value of home equity comes when it is utilized as a creditable asset that can allow you to secure a one-time loan. Alternatively, you can use your home equity as a line of credit, called a HELOC.
How Home Equity Loans Work
Home equity loans work by using the equity on your home as collateral for the loan. These loans are provided in one lump sum and are paid back in fixed installments. The interest rates are typically far lower than that of traditional loans such as credit cards. While a home equity loan in Maryland can prove to be a highly advantageous endeavor, it is also a risk that could put the ownership of your home in jeopardy should you default on your loan payments. You are also at risk of having the value of your home decrease meaning that you would owe more than the appraised value of your property.
How Home Equity Lines of Credit (HELOC) Work
A home equity line of credit or HELOC operates as a line of credit that lets you borrow money, like a credit card, with a variable interest rate. HELOCs differ from normal home equity loans due to their fluctuating monthly payments and the ability to take out as little or as much as you want. The limit of credit is based on the amount that the equity of your home is worth. HELOCs are preferred for those who want a line of credit available as opposed to a single loan.
Naturally, these loans have requirements for those looking to take out a home equity loan in Maryland. The majority of lenders require a credit score to be 630 or higher but to qualify for the best rates, a credit score over 700 is preferred. You also must have a debt-to-income ratio of no more than 43% and a verifiable source of income. Also, the equity in your home must be greater than 20% of the home’s total value. The current average rate for a HELOC home equity loan in September 2022 is 6.51% with a range of 5.27% – 9.14% and the average rate for a home equity loan is 7.01% with a range of 6.45% -8.16%.
Federal Hills’ Home Equity Pro Solution
Home equity is one of the most appealing aspects of home ownership, but what happens when you are prevented from accessing your home equity because of a mandatory refinance? Federal Hill Mortgage has an answer with our Home Equity Pro Solution. Now, you are able to access your equity without having to refinance or change your current mortgage rate. Additionally, you will get to enjoy no out-of-pocket closing costs and no traditional appraisal is required in most cases. We make it possible for you to utilize your home equity and leverage your property investment with Federal Hill Mortgages Home Equity Pro Solution.
Get the Best Home Equity Loan Rates in Maryland
If you are looking for a mortgage lender and broker to help you secure the lowest home equity loan rates in Maryland, your search ends with Federal Hill Mortgage. Our experts will proficiently guide you through the home equity process and ensure that you get the most out of your property. Apply today to see how we can make your home equity benefit you!