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Anybody have experience with a Home equity loan?
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I bought my home three years ago with a 30 year fixed mortgage and an interest rate of 3.6%. I have an apartment on the property as well as the home. I would like to move into a bigger house and rent out the house and the apartment. I also would like to re-build the very outdated house on the property. Is taking out a home equity loan, with the current economy, a good or bad idea to do this? It seems like a good idea, but I don’t know much about it. To be clear, I would either want to buy another property OR rebuild a bigger and safer house on the current property.
Top Comment: With current interest rates...not very good at all.
Are Home Equity Loans ever a good idea?
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This may or may not be the best sub to post this but I would appreciate all relevant opinions from professionals that likely have dealt with this question.
As the title states, Wondering if home equity loans are ever a good idea? And if so when?
I own a home that has just around 90K owed. The value of the home is probably around $230,000-250,000.
Wife and I have been doing a few things here and there to improve the house but some of the bigger things are creeping up now. (Bathroom / kitchen remodels, flooring etc)
I would love to get everything done all in one fell swoop but would only be able to do that with a larger loan.
Anyone have input or their two cents / advice? Stay away from HE loan altogether? Go for it?
EDIT: I learned a lot in just a handful of responses. Thank you all.
Top Comment: The rate on a HELOC right now is ~9-10 percent. The rate on a credit card is ~20 percent.
Best home equity loan rates today – is 7.90% a good rate? What’s the lowest?
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Just got approved for a home equity loan at 7.90% and I’m wondering if that’s actually a decent rate in today’s market or if I’m overpaying. It’s a fixed rate, and everything else in the offer looks fine, but I don’t want to lock in something high if better deals are out there.
Anyone know what the lowest home equity loan rates are currently? And where/how I can compare or find cheaper rates? I’d really appreciate tips or lender suggestions from people who’ve been through this recently.
Top Comment: Depends on credit score and LTV, but yeah that's solid considering their based off an index that starts at 7.50.
Home Equity Loan, don't want to get tricked somehow
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I grew up poor and navigating finances, credit, home buying, etc is something I've had to learn all as an adult. Occasionally I have thought that everything seemed straightforward only to get caught in a loophole I didn't see coming. Please let me know if I am missing something here.
My husband and I bought a house 10 years ago and we would now like to take out a home equity loan to add a large addition (50% of our current square footage) and a pool to our house.
We have a 30 year, fixed rate mortgage. Started at 265k, currently 189k, 4.2% interest rate. Current approximate home value is 450k (appreciation all from the market, we've kept the house up and made small improvements but not in any way that would significantly impact our home value). Credit scores 800+, only debt other than the mortgage is 60K in student loans. Combined income 185K. (I know we can afford this, I'm not asking about that. Just trying to paint a full picture.)
We would like to take out a home equity loan to finance our addition and add an in ground pool. This is our forever home and we are looking to add value for us, not for resale.
Is it that simple? I can't help but feel like I'm missing something. What should I be aware of or look out for when shopping lenders?
(I don't have a cost for the project yet. My husband is working on that while I have been tasked with arranging the financial side. The project will cost less than average because my husband was in the construction industry and will be doing a lot of work himself and is able to use his connections to help source materials and contractors at favorable costs.)
Top Comment: I went through something similar while looking to fund a major home improvement. A lot of lenders kept pushing for a full refinance even though I was just interested in a home equity loan, it felt like they were prioritizing their own commission over what actually fit my needs. What helped me was using a platform that screens lenders. I used ElitePersonalFinance, they only list legit services and work with top mortgage lenders. I found my lender through them and ended up with fixed terms and a decent APR, which was tough to find elsewhere. Just be cautious of anyone who won’t give a clear breakdown of fees or keeps referring to effective rates, that’s usually a red flag for hidden costs. Hope this helps.
Eli5: how do home equity loans work?
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I'm trying to figure out how exactly home equity loans work. I've looked it up, and all I'm getting is a complicated description of how equity is calculated.
Does it work like a regular loan, or does it work some other way?
Top Comment: You borrow money using the value of your home as collateral. There's really not much more to it than that. Someone lends you money and, if you default, the lender gets to take their payment in the form of a right to part of the value of your property.
Please explain to me like I'm five. What exactly is home equity and how do you make it work for you?
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My family is constantly drowning in debt. And things seem to just keep getting worse. We're told that our home is worth around 300 K. Still making mortgage payments though but we've been living in it for about 25 years now.
We're constantly behind on the bills. Both of my parents are out on disability. My dad's going to have to transition into an old folks home soon. I'm working 40 hours a week, but I'm physically disabled and taken care of my dad, so I can't do overtime or second job.
We've recently found out that there's black mold in a roof. There's a slow leak that we've been ignoring because we couldn't afford a roofer, and it's gotten worse.
There's also countless little problems throughout the house that could or should be fixed. If you floorboards. Worn out hardwood in the kitchen. Carpets with 20 years worth of kids and pet stains.
And it looks like the timing chain in my car is going bad and that could be a few thousand dollars to get fixed.
I've made several posts over the last few months asking for advice on selling the house. I keep dreaming about just giving up on this POS. Sell it for just over 300 K. Use that money to buy something smaller and more manageable.
But is there something else I'm not thinking of? I know that there's a thing called home equity loans but I don't know how they work. And it still have to pay it back right? What's the point of having equity? Is an equity supposed to be mine? Why would I have to pay back my own equity?
Top Comment: Equity is just the difference between what it would sell for and what you still owe on it. Of course if you sell you’d need housing. Maybe you buy. Maybe you rent. Either way unless you downsize the cost of each is bound to be higher than what you have in today’s market. Unless you’re moving from an expensive place (like Los Angeles) to a cheaper place (like Macon GA). Equity is not something you can easily access. Or should. There are loans but they are loans. You’ll either repay them or lose the house when you die, like in a reverse mortgage loan. Now can you take out an equity loan to repay high interest debt like credit cards? Yep. But still a loan. It’s exchanging 24% money for 6-7% money (depending on your credit). Basically equity is for your heirs most often. Not you because you’re living there.
ELI5 Home Equity - What’s the catch?
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Friends. I keep getting emails from my mortgage company offering a chance to pull from my 30k+ equity. How does that work? What happens if I try and cash it out?
Top Comment: It’s a loan that you will pay back with interest. However, if you need a loan this is not a bad option as the interest rates will likely be as low as you’ll find.
Best home equity loan rates – which banks or credit unions offer the lowest rates?
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Hey guys,
I’m looking to take out a home equity loan, mostly for home improvements and a bit of debt consolidation. My credit is around 570, and I’ve got decent equity.
Some banks are quoting me over 15%, which feels high. Does anyone know of credit unions or lenders offering lower rates right now?
Please tell me. Thanks
Top Comment: I’m surprised you found someone to work with you at all with 570 credit
Home Equity Loan
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First time homeowner here. We purchased our house back in 2021 with a 2.65% interest rate. I'm hoping someone wouldn't mind explaining more in depth how a home equity loan works. Do you need to refinance to qualify/get a loan? Would we need to pay to have the house reappraised to assess equity/value? We have a dry unfinished basement that we'd like to finish but not sure which direction would be the financially smarter route.
Top Comment: Loan officer here. Firstly I would do a home equity line of credit (HELOC), rather than a loan. That way you only owe on what you use, and if you don’t use the full line (which you should try to avoid!), you can spend more in the future. Think of it kinda like a big credit card. I’m sure it’s different at each financial institution, but at mine we will loan up to 80% of equity, using the appraisal that we do as the guideline. So our appraised value, minus what you owe on the mortgage, x 0.8. You want to aim for as high a number as you can, to keep your usage % low. Remember, you never have to use it. Rates at my FI are a bit higher than another commenter said, though. I closed a HELOC on Wednesday at a 10.95% (variable). Husband and wife, credit scores between 765-795. On our product, the minimum payment is 1.5% of the balance, and you can always pay more without penalty. We do charge for the appraisal (usually a drive-by and comps), title search, and filing fees. Most of the time this comes to around $275. I’m sure there are some places who let you roll that in.
Why so hard to get an equity loan or line of credit
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I’ve been trying for the better part of a year to get a line of credit or home equity loan.
I’ve been working and paying myself through my corporation. For more than a year I’ve always worked another job that pays me biweekly and is a union job with a lot of overtime.
My wife has been working for more than 2 year a union job. Every lender I’ve tried won’t take into account my hourly rate job that I have had for more than a year. They want to see at least 2 full years. My credit score is better than my wife’s. But adding my company job plus my union job plus my wife’s job and I can’t get approved. I have more than $400,000 in equity in my home. I’m trying to pay off credit card debt that I accumulated from some medical debt and some house renovation.
I just don’t see how hard it is to get an equity loan where I have three incomes that are more than $10,000 net each month but these lenders won’t approve. Sorry for the vent but I feel like I can’t use my equity for anything.
Top Comment: What's your DTI? How much total debt do you have?