Home Equity Loans
Every home has a value. The value of your home is determined by an appraisal.
An appraisal is the comparison of your home to the value of other homes and properties that are similar in nature, size, length of time standing, location, style etc.
The equity you may have in your home is determined by: The value of your home less the mortgaged amount of your home, which equals the amount of home equity that you, have available for use as cash.
A home equity loan also is referred to as a second mortgage.
Typically, second mortgages fall into one of the two following categories:
- Equity seconds are second mortgages that use the equity you have in your house as the basis upon which a lender loans you money. Most lenders will require an appraisal in order to establish the value of the house and the equity contained therein. Borrowing with an equity second normally allows you to obtain a better interest rate due to the fact that the money borrower is secured on property you already have ownership in.
- Over-equity seconds are second mortgages that lend you money over and above the value of your house. Over-equity seconds are more commonly known as "125's" or "115's" because they allow a lender to loan you money at 125% or 115% of your house's value. Requirement of appraisal is based upon the amount of money borrowed. Typically, if you plan to borrow over $35,000 on an over-equity loan, an appraisal is required. Borrowing with an over-equity second allows you to obtain a loan when a personal loan may have not been possible.