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What is a Home Equity Loan?

A home equity loan is a loan that is secured with the equity that you have obtained over the course of your loan. To determine the amount of equity you have you must determine what your home is worth at current market prices, and then subtract the remaining balance on your mortgage. For instance, if your home is worth 200,000 today and you owe 160,000 on the remaining note, then you have 40,000 dollars in equity.

Ideal uses for a home equity loan include: debt consolidation, home improvements, new vehicle, tuition, ore emergency home repairs. Home improvements and repairs are perhaps the most popular reasons for such a loan. Which makes sense, because such repairs will actually increase the value of your home, allowing you to actually make a profit on the loan.

One word of caution however, since your home is up for grabs it is important that you consider all the angles. Borrow only what you actually need, and make sure that you are able to pay the monthly payments. Take into account the fact that things happen, and would you still be able to make the payments if you or your spouse lost their job or went back to school. If the market value of your home decreases, you could actually end up owing more than your home is worth. So do your research, and discuss your options with your home equity loan company before doing anything.

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