Home Equity Loan
Equity is the difference between the current market value of your home and the amount you owe on it. Home equity loans can be used to finance virtually anything, and often offer tax advantages (see a tax professional for details).
There are two main types of equity loans:
Fixed rate equity loan:
- Best used for a specific purpose, such as a room addition, remodeling, consolidating higher interest debt, or the purchase of a new car.
- Interest rate is fixed during the entire term.
- Payments are fixed each month for a set term.
Variable rate line of credit:
- A line of credit gives you quick access to cash, a prudent way to prepare for the unexpected.
- Repaid funds become available again without the need to reapply.
- You only pay interest on the amount of money you use.
- Minimum payment requirements only 1.5% of principal balance owed on the billing date ($75.00 minimum).
- Free line of credit checks.
- Variable rate interest can increase or decrease with market conditions.
Calculating available equity:
- First, estimate your home's current market value.
- Next, take your estimated market value times your qualifying percentage (see example below). Then subtract the current balance of your mortgage (and any other loans secured by your home) to arrive at the maximum amount of your available equity.
90% home equity loan example:
|Current market value of home||$150,000|
|Minus 1st mortgage balance||- $85,000|
|Maximum home equity available||= $50,000|
How to apply:
Because home equity loans are secured by your home, you may need to provide additional documents including:
- A recent statement copy from your current mortgage holder showing your current balance.
- A copy of an appraisal on your home completed within the last 6 months.
- A copy of a document that includes the legal description of your property, such as a Warranty Deed or Title Insurance Policy.
- A copy of your most recent homeowner's insurance policy.
Home equity loans are available to existing customers, or new customers who live or work in Minnesota, for properties located in AZ, FL, IL, IN, IA, KS, MN, MO, NE, ND, SD & WI.