Home Equity Loan FAQ

The following are a list of questions that are frequently asked about home equity loans.

Why should I take out a home equity loan?

Home equity loans are easier to get approved for because you are using your house as collateral. Since you have such a nice bargaining chip you can get a lower interest rate and usually get a higher loan than you would if you took out a personal loan from a bank.

What is a second mortgage?

Home equity loans are often called a second mortgage because you basically are taking out another mortgage on your house. Only instead of using it to pay off the original purchase of your house, you are using it to pay for whatever you want.

What is a home equity line of credit?

A home equity line of credit, or HELOC, is when you borrow smaller amounts against the cost of your home. It is kind of like a credit card. If your equity value is worth $100,000, that is your line of credit. You can borrow as often as you want as long as your total value never exceeds $100,000.

Can I get a home equity loan with bad credit?

Yes. Another advantage of home equity loans is that they are one of the easiest ways for someone with bad credit to take out a large loan. Since you are using your house as collateral, you have a better chance of getting approved. If you have a low credit score you will likely have to pay a higher interest rate, however.

Is there a certain time I have to wait in-between getting a mortgage and taking out a home equity loan?

No, however the amount you owe on your mortgage is subtracted from the total amount of you can receive for a home equity loan. If you take out an equity loan right away you probably are not going to be able to get a loan for much more than what your down payment on the initial mortgage was.