|Home Equity Options||HELOAN||HELOC||Investor HELOC|
|Product Type||Fixed Loan||Line of Credit||Line of Credit|
|Max Loan-to-Value Ratio||95% (primary)||95% (primary)||80% (investment)|
|Close in as few as 7 days|
|Funding in one lump sum|
|Draw funds as you need them|
|Special Features||-||-||Register under LLC|
Home equity refers to the difference between your home's fair market value and the balance remaining on your mortgage and any other liens. Essentially, it's the portion of your property that you've paid off and truly own. As you repay your mortgage, or as your property's value increases, your equity grows.
The calculation for home equity is straightforward: it's your home’s fair market value minus the total owed on your mortgage. The fair market value is the selling price your home would likely fetch in today's market. Online appraisals or competitive market analyses can give estimates, but lenders usually employ third-party appraisers for official numbers when considering loans.
Homeowners can tap into their equity through options like a Home Equity Line of Credit (HELOC), Home Equity Loan (HELOAN), reverse mortgages, and specific products like the Investor HELOC. These options let homeowners borrow against their equity for various reasons such as home improvements, debt consolidation, or investments.
HELOCs offer a revolving line of credit similar to a credit card, typically with variable interest rates. HELOANs provide a one-time lump sum amount with fixed repayments and interest. Both use your home as collateral, offering potentially larger sums and lower rates than unsecured loans.
Accessing home equity through products like HELOCs or HELOANs can offer lower interest rates than personal loans or credit cards, making it an appealing solution for debt consolidation. However, since your home is collateral, it's crucial to be confident in your ability to repay the borrowed amount.
Yes. If property values decline, or if you increase the debt secured by your home, your equity can reduce.
While home equity itself won't affect your credit, borrowing against it might. Timely repayments on a HELOC, HELoan, or Investor HELOC can boost your score, but missed payments can hurt it. Nonetheless, just inquiring about home equity products doesn't impact your score.
Both types of HELOCs leverage home equity, but an Investor HELOC is specifically tailored for real estate investors. It provides unique features advantageous to them, such as the option to register the HELOC under an LLC and the capability to tap into as much as 80% of the property's equity, even if there's an existing primary mortgage.
For a HELOC, during its draw period (typically 5-10 years), you usually make interest-only payments based on your outstanding balance. Once this period concludes, you enter a repayment phase where you repay both the principal and interest over a set term, usually spanning 10-20 years. In contrast, a HELOAN starts with a fixed repayment term where you make consistent monthly payments covering both the principal and interest over the loan’s duration.
Second mortgages, such as HELOCs and HELOANs, often come with higher interest rates due to increased risk factors. In the event of a foreclosure, the first mortgage has priority for repayment, leaving second mortgages at a higher risk of not being fully repaid. Moreover, second mortgages add an additional layer of debt on top of the primary mortgage. As a result, to compensate for these risks, second mortgages generally have higher interest rates.
Once you’ve completed the Home Equity Questionnaire, you can expect a response from us within 2 business days. Our team is dedicated to reviewing your details promptly and providing recommendations on the best home equity product tailored for your needs.