Your house is not only your home; it is a tremendous asset. As your home grows in value and you put more equity into it, your ability to leverage that value increases. Let’s look at three types of financing using your home.
Home Equity Loan
One of the ways you can leverage home value is through a home equity loan. Home equity loans are an attractive lending tool that can enable you to turn the cash value of your home into cash in your hand.
Home equity is the appraised value of your house subtracted from the current amount of debt secured by your home. In other words, it is the cash value of ownership you have in your home. Loans like a traditional home equity loan, a cash-out refinance loan or a home equity line of credit make that cash value available to you for other uses.
Discover Home Equity Loans currently offers traditional home equity loans. To qualify for a Discover Home Equity Loan, most borrowers must meet the follow criteria:
- Credit score of at least 620
- History of appropriate credit use
- Verifiable income and employment
- Adequate home equity available for borrowing
Terms, rates and fees depend on the lender. Details of a Discover Home Equity Loan include:
- Loans from $35,000-$150,000
- Competitive fixed interest rates
- Terms of 10, 12, 15, 20 or 30 years
- No application, origination, or appraisal fees, and no cash is required at closing.
While home equity loans are great lending tools, you must be smart when deciding which kind of loan to leverage and how much to borrow. After all, the funds you borrow are secured by the home you live in, so you want to borrow intelligently.
Whether you want to update the bathrooms in your home or consolidate debt into affordable payments with a lower interest rate, a traditional home equity loan works best for lump sum lending needs.
Alternatively, you could use a cash-out refinance loan, which acts just like a traditional home equity loan. The main difference being that instead of having a first and second mortgage, as you would with a traditional home equity loan (assuming you had a first mortgage already), a cash-out refinance loan combines your existing mortgage with the newly borrowed funds. With a cash-out refinance loan, you take out a new home loan for more money than what you owe on your current loan, and receive the difference in cash.
Home Equity Line of Credit
Lastly, a home equity line of credit is a great option when your borrowing needs require flexibility. A home equity line of credit is considered revolving credit because it allows you to borrow money as you need it, with your home as collateral. Perhaps you don’t know how much money you will need, or you want to finance something over time. In these types of situations, a home equity line of credit will offer you the “as needed” flexibility you require.