Let your home work for you!
You have big plans for the future and sometimes, you need a finance option to help turn those dreams into reality. If you’re looking to finally start you next remodeling project or need money for life’s other major costs, a home equity loan may be a great option for you!
With low fixed rates and flexible repayment terms, there are many advantages to getting a home equity loan. But it's important for you to understand the ins and outs of this type of loan before applying.
Let’s take a look at Home Equity Loans and see if it’s the right option for you!
What is a home equity loan?
Not to be confused with a home equity line of credit (HELOC), a home equity loan (also referred to as a HEL or HELOAN) is an installment loan that’s secured by the paid value of your home. In other words, homeowners can borrow money and use their home’s equity as collateral. According to the Consumer Financial Protection Bureau, equity is defined as “the amount your property is currently worth, minus the amount of any existing mortgage on your property.”
What are the advantages to getting this type of loan?
Some advantages to getting a home equity loan through a credit union are that they can be offered at lower interest rates and greater flexibility in payment terms. At Clearview, our repayment plans range from 5 to 20 years and our fixed rates mean monthly payments won't change over the life of the loan.
Some other advantages include receiving funds in a lump sum and generally lower fixed rates compared to other types of loans, due to using your home as collateral. If you own a home in the state of Pennsylvania, you can borrow up to 90% of the appraised value of your home, minus what you owe on your mortgage.
What about the disadvantages?
Because these types of a loans are more easily obtained than others, borrowers need to be extra cautious about how much they borrow. This loan may seem like an easy answer to attain a lump sum of money. But borrower beware! This could cause you to fall into a continuous sequence of spend, borrow, spend, repeat — thus spiraling further into debt. This cycle is known as reloading which, according to Investopedia, “is the practice of taking out a new loan to pay off an existing loan to obtain a lower interest rate or to consolidate debt.”
Another major disadvantage is the very real fact that your home will be collateral. Before getting this loan, it’s very important to recognize that if for whatever reason you can't repay the loan, your house could potentially be foreclosed upon.
I’ve decided a home equity loan is right for me. What’s next?
Our team at Clearview is here to help! You can each out to one of our Lending Representatives today or go ahead and apply now. In the meantime, we have financial calculators to help you better understand your future loan.
In all, you’ve worked hard to build equity in your home. With low fixed rates and flexible repayment plans, now’s time to let your home work hard for you with a home equity loan!