How does a home equity loan work?
A home equity loan, also known as a second mortgage, enables you as a homeowner to borrow money by leveraging the equity in your home. The loan amount is dispersed in one lump sum and paid back in monthly installments. The loan is secured by your property and can be used to consolidate debt or pay for large expenses, such as home improvements, education or purchasing a vehicle. Both the interest rate and monthly payments are fixed, ensuring a predictable repayment schedule.
Here are some of the most commonly asked questions.
Are there closing costs on a home equity loan?
Although some lenders charge fees for home equity loans, at U.S. Bank, there are no upfront fees or closing costs.
How much equity do you have in your home?
Your equity is the share of your home that you own versus what you owe on your mortgage. For example, if your home is worth $300,000 and you have a mortgage balance of $150,000, then you have equity of $150,000, or 50 percent.
How long do you have to repay a home equity loan?
You’ll make fixed monthly payments until the loan is paid off. Most terms range from five to 20 years, but you can take as long as 30 years to pay back a home equity loan.
Can you sell your house if you have a home equity loan?
You don’t have to pay off your home equity loan or other liens to list your home for sale. At the sale’s closing, creditors holding liens on your home’s title will be paid off from the proceeds of the sale.
Is the interest on a home equity loan tax deductible?
The interest cost on a home equity installment loan may be tax deductible, but it is always wise to check with your tax advisor for details.