How It Works - A Home Equity Loan

A Home Equity Loan (HELOAN) is another type of loan that allows you to borrow against the equity in your home. A HELOAN can be a valuable tool in achieving your financial objectives. Click HERE to explore the benefits.

Here's how a Home Equity Loan typically works:

• Collateral: Similar to a HELOC, a Home Equity Loan uses your home as collateral. This means that your property could be at risk if you fail to make the required payments.
• Fixed Amount: Unlike a HELOC, a Home Equity Loan provides you with a lump sum of money upfront. The loan amount is determined by the equity you have in your home, which is the appraised value of your home minus the balance of any mortgages or other liens on the property.
• Fixed Interest Rate: Home Equity Loans often come with a fixed interest rate. This means that the interest rate remains constant over the life of the loan, making it easier to budget for fixed monthly payments.
• Repayment Period: Typically, Home Equity Loans have a fixed repayment period, commonly ranging from 5 to 30 years. During this time, you make regular monthly payments to repay both the principal and interest.
• Use of Funds: The funds from a Home Equity Loan can be used for a variety of purposes, such as home improvements, debt consolidation, education expenses, or other major expenses.
• Tax Deductibility: In the past, interest on home equity loans was often tax-deductible, but the tax laws have changed. The deductibility of interest on home equity loans depends on how the funds are used. It's important to check the current tax regulations or consult with a tax professional for the most up-to-date information.
• Risk and Considerations: While a Home Equity Loan provides a fixed amount and predictable payments, it's important to carefully consider the risks and the fact that your home is used as collateral. Failure to make payments could lead to foreclosure.

If you're considering a HELOC and would like to explore solutions, our dedicated loan officers are here to learn about your needs and offer potential solutions.

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