When you apply for a home equity loan, the creditors need to determine what amount of money to lend you. Generally, you can’t borrow more than 85% of your home’s price – taking into consideration your first mortgage and other home equity loans you apply for.
The lenders determine the so-called loan to value ratio. This is the percent of your house’s value available. This number can be different, so you need to make a detailed research before making your final decision.
When you agree as to the terms and conditions on your home equity loan, you get the entire amount of money at once. You have a fixed interest rate that is set up-front. With each payment you reduce the loan balance and cover the interest costs.
If you violate the repayment terms, your loan provider can sell your property and cover the unpaid funds. Most borrowers make this second mortgage a prior one, as they want to keep their houses.
Find more information about the home equity credit options on this page:
Best home equity loans.