About Home Equity Loan
Many homeowners want to know information about their home equity and how to use it. What are the home equity loan products available for their major expenses?
Let us understand two types of home equity loans in Texas, and why would you need them.
What Is Home Equity Loans In Texas?
A home equity loan is a second mortgage that is borrowed against the remaining equity on your house after the first mortgage. The amount of the loan is decided on the property value and your current 1st mortgage balance.
In HEL borrower gets the entire loan in a lump-sum amount. HEL is usually shorter in term compared to 1st mortgage. The guidelines for a home equity loan in Texas vary from that of the other states.
What is the Home Equity Line of credit in Texas?
Unlike the HEL Home Equity Line of Credit (HELOC) is a revolving credit line with a specific limit just like credit cards. This credit line is given to the borrower against the equity in the house.
With the HELOC borrower can choose how much money to withdraw from the allocated credit line.
And will be making the payment only on the amount withdrawn. HELOC is one of the most popular home equity loans in Texas.
How to obtain HEL/HELOC in Texas?
To get a home equity loan in Texas, an individual should have an excellent to good credit history. Also, the loan to value should not exceed 80 % of the property value, which would also include your 1st mortgage.
The rest of the procedure is very similar to refinancing with cash-out. The choice depends on the borrower to opt between a line of credit or a home equity loan.
Why HEL/HELOC?
HEL/HELOC is usually obtained to cover significant expenses such as home repairs, college educations, medical bills, or paying off any unsecured debts with a high interest rate.
Let’s say you have several credit card debts with high interest rates. You can opt for HEL/HELOC and pay off the credit card debts, and get a lower interest rate under one single payment.
To obtain home equity loans in Texas, get in touch with your current bank or your trusted loan officer.
Conclusion
Though this looks like a beneficial and smart financial move, you have to consider your intentions thoroughly before you tap into your equity, as failure to make the payments on HEL/HELOC may risk your property towards foreclosure.
Talking to your loan officer would give you better knowledge about obtaining any of the home equity loans in Texas.
About Home Equity in Texas
In this post, we will understand what is home equity is and how to grow and use the equity in Texas.
What is Home Equity?
Home equity is one of the most common phrases used in real estate. A simple equation to understand equity is, {Home Value} – {Mortgage} = {Home Equity}.
There could be other liabilities on your home like tax liens, general liens, etc. but for simplifying the understanding process, we will provide you an example of your mortgage as a liability.
An example to start with will be if you own your home outright, which means if your home is worth $100,000 and there is no mortgage or any other lien on the house, you have $100,000 in Home Equity.
Not everyone has 100% equity, so let’s take another example where your home is worth $100,000, and you have a mortgage of $30,000 and no liens. This means you have $70,000 in Home Equity.
Example: $100,000 (Home Value) – $30,000 (Mortgage) = $70,000 (Home Equity).
In the above example, you would have $70,000 in equity, which means if you sell your home, you will get $70,000 cashback at closing, minus realtor fees and closing costs.
How to Grow Home Equity in Texas
Since home equity is a valuable asset, you want to increase your home equity over time. The way how to grow home equity in Texas is to simply put a large down payment when you purchase a house.
For example, if you are buying a $100,000 home and you put $20,000 as a down payment, you will have $20,000 in home equity.
Another way to grow home equity in Texas is by paying extra towards the principal on your mortgage.
You could spend a lump sum amount when you receive additional funds or pay a small amount every month towards your principal amount.
This will help grow your home equity in Texas by a substantial amount.
One more way to grow home equity is through property appreciation.
Every time a person goes through property appraisals, and if the property value appreciates, it increases your home equity.
For example, If the property value gets appraised to $120,000 with a mortgage balance of $50,000, the total home equity would be $70,000.
How to Use Home Equity In Texas
When you have equity in your home, the question is how to tap into the home equity that you have managed to build over sometime. Below are the ways you can use home equity in Texas.
- Obtain a Loan (Home Equity Loan / Cash out Loan) – You can approach any financial institute like a bank, lender, or mortgage broker who can help you get a loan against the home equity that you have built. The interest rate on the home equity is lower compared to any other loan such as a car loan, business loan, personal loan, etc.
- Sell the Asset – Once you have enough equity, you can always sell the house and get the equity in cash at closing.
Conclusion
There are many financial institutes in the market to provide you with a home equity loan in Texas or help you with a cash-out refinance.
However, it is advised by many financial planners to use your home equity wisely.