A home equity loan is a second mortgage that lets you borrow a lump sum of cash using your house as collateral. It features a fixed interest
rate (averaging around 7.35%) and predictable monthly payments over a set term. Lenders generally allow borrowing up to 80% or 85% of your home equity.

How It Works & Requirements

• Calculation: Equity is your home’s market value minus your current mortgage balance.
• Credit Score: Most lenders look for a FICO score of 620 to 660 or higher.
• Debt-to-Income (DTI): A ratio usually capped at 43% to 45%.
• Payout: Received all at once at closing, with interest starting immediately on the full amount.

Pros and Cons

• Pros: Lower interest rates than credit cards or personal loans; fixed payments for easy budgeting; potential tax deductions if used for home improvements.
• Cons: Puts your home at risk of foreclosure if you fail to pay; requires closing costs; adds a second monthly bill.

If you’d like, let me know:

• What you plan to use the funds for (home improvements, debt consolidation, etc.)
• Your estimated credit score range

I can help you compare a home equity loan against a HELOC or cash-out refinance for your specific goa