What even is a home equity loan? 🤔

If you hear “home equity loan” and think, “Ah, yes, I know what some of those words mean…,” you’re not alone. (Because same.)

Homeownership can feel overwhelming, and ICYMI, it’s a pretty big deal in Lakeland – Realtor.com ranked LAL the #1 city to buy a home last year.

So, what’s the deal with equity loans?

Equity (noun): The dollar value of a home, calculated by subtracting the mortgage amount from the market value (a.k.a. what you owe on your home vs. what your home is worth).

The loan part comes in here: Because you’ve paid into your home, you can borrow against it.

There are several reasons a homeowner might choose to apply for a home equity loan – a.k.a. a “second mortgage” – including major home repairs, needing to pay college tuition for the kids, or debt consolidation.

And there are essentially two types of home equity loans:

1. Open-end home equity line of credit (HELOC): You can continually borrow up to your limit over the course of 10 years.
2. Closed-end home equity loan: You receive your borrowed amount in one lump sum.

Here’s when to choose which.

That’s a lot of info. Need further explanation? Click here to contact your local MIDFLORIDA Credit Union branch and talk to an expert IRL. Ⓟ