A home equity loan (second mortgage or equity release) is a type of loan that allows homeowners to borrow money against the equity they have in their property, using their home as collateral.
With home equity loan, you can borrow a lump sum of money using your home's equity as collateral. Equity is the difference between the current market value of home and the outstanding balance.
The requirements for home equity loan may vary depending on the lender. Generally, you will need to have a significant amount of home equity, a good credit score, and stable income.
Home equity loans can be used for a variety of purposes. Common uses include home improvements, debt consolidation, education expenses, medical bills, emergency, or other major expenses.
Loan amount you can borrow typically depends on the available equity in your home and the lender's criteria. The eligible loan amount is up to 80% to 90% of the market value of the house.
The loan is repaid over a set term, typically ranging from 5 to 30 years. Monthly payments are structured to pay off both the principal amount and interest within the loan term.
Home equity loans come with a fixed interest rate, meaning the interest rate remains the same throughout the loan term. Typically, home equity loan interest rates are between 7% to 10%.