Your home is a valuable asset even before it is completely paid for because you can borrow money against the portion of the home that you actually own. This type of loan is known as a home equity loan. These loans make it possible for homeowners to get funding for things like replacing a roof or doing major maintenance when they may not otherwise have a way to get the money they need. If you are a homeowner who has some of your home paid for, you may qualify for a standard home equity loan. However, before you borrow, there are a few things you probably want to know.
What is the difference between a standard and HELOC equity loan?
When it comes to home equity loans, there are pretty much two different types of loans, depending on who you are borrowing from. The Home Equity Line of Credit, or HELOC, is a loan that allows you to borrow small amounts up to a certain number. This is a good option if you are doing remodeling and are not sure how much you need. However, the standard home equity loan is more simple, allowing you to borrow a certain lump sum.
What if you only need a small amount of money?
Standard home equity loans are not really designed for borrowing small amounts of money. In fact, there are many lenders who will not go below a pretty large figure when it comes to home equity loans of the standard type. If you only need to borrow a small amount, it can be better to go with a HELOC equity loan instead because you can borrow just what you need. standard home equity loans can require a complete reconfiguration of your mortgage and a lot of paperwork, so going through all of this for a small loan is not a feasible option for most lenders.
What happens if you borrow a home equity loan and cannot repay?
If you do accept a home equity loan and then default on the payments, you could definitely be at risk of losing your home to foreclosure. Even though these loans come with a different name, they are still basically a mortgage loan with the equity in your house used as collateral. Therefore, if you do not keep up your payments, the lender still has a right to take your property and sell it to recoup what they loaned you.