A home equity loan is a form of credit for which your home is pledged as collateral. Generally, home equity loans offer a fixed interest rate and a fixed monthly payment. A standard home equity loan (also called a second mortgage) is paid off over an extended period of time.
You can estimate your homes equity. The difference between the value of a property and any outstanding mortgage balance(s) or liens against it. Also referred to as owner’s interest by adding the balance of all the debts secured by your home, then subtracting the total from your home’s value.
What are the primary advantages of a home equity loan?
The two major advantages of borrowing with a home equity loan are lower interest rates and potential tax savings:
The interest rate you will pay on the average home equity loan is generally lower than the interest rate you will pay on the average credit card or any other type of non-secured debt.
For home equity loans, you can generally deduct the interest you pay. The interest you pay on credit cards and other types of personal loans is generally not tax-deductible. Consult your tax pro about deducting your interest.
Are there hidden fees? Can I make additional principal payments in order to pay off my loan early?
Yes. You may make additional principal payments. Include the additional amount with your regular monthly payment to have the additional payment applied to your account. If you wish to pay your loan in full, check your loan terms to determine if a prepayment fee will apply. Most home equity loans include a fee, which is charged upon full prepayment. If this prepayment fee applies to your loan, it will be disclosed in your final loan documents.
Your Maine Mortgage Specialist can advise you on all of your Equity Line options available within your Maine Home.