How Much Can You Borrow Against The Equity In Your Home?
Matrix Mortgage Global – How Much Can You Borrow Against The Equity In Your Home?
Let’s start by explaining what home equity is. In simple terms, home equity is the difference between the value of your home and the unpaid balance of your current mortgage. It is basically how much money you have put down on the principal of your mortgage, plus or minus any increases or decreases on the property value of your home. Thus, how much home equity you have increased as you pay down your mortgage and if the value of your home increases.
Understanding that, a home equity loan then is a type of loan that allows homeowners to borrow money using the equity that they have put into their home as collateral. This type of loan can also be referred to as a second mortgage. This means that the loan is secured with your home equity. It also means that you will end up paying off two mortgages simultaneously. While you pay off your second mortgage, you will also need to maintain payments on your first.
When you choose a home equity loan, it creates a lien against your home, therefore, reducing your home equity. This can help you to free up some cash that you may need to help you reach some of your short-term financial goals, or to help you through an unexpected life event. However, if for some reason down the line you can’t make your payments and your loan goes into default, you may lose your home.
The major pro to securing a home equity loan is that although you must be approved before you can borrow from your home equity, once you are the interest rates on loans secured with home equity can be considerably lower than other types of loans.
The major con, of course, is that you could potentially lose your home if you’re unable to repay a home equity loan. Along with that, the interest rates will likely be higher on your second mortgage than they were on your first. So before securing one, you will want to weigh out carefully if that is a risk that you can take.
Once you’ve weighed out the risks and determined that a home equity loan is right for you, how much can you borrow?
You can borrow up to 80% of the appraised value of your home, minus the balance left on your first mortgage. So, let’s say your home is appraised $250, 000. You can borrow up to $200, 000 minus however much you have left owing on your current mortgage.
Contact us here at Matrix Mortgage Global today at 1-800-542-0601 and we can get you started!