As the price of houses is increasing, home equity loan is becoming more popular, attractive and accessible. Home equity is now considered as a low cost source of fund for home renovations projects and other basic needs. Borrowing money against home equity is a comfortable way to get cash, but it can also be risky if you do not have proper knowledge of it. In this article, you will know everything about home equity.


What exactly is a home equity loan?

It is a loan amount you borrow against the difference between the amount you owe on your house and the market price of the house. In home equity loan, you get money from the lender that you will pay at a fixed interest rate with a monthly payment. To know more about home equity loan, visit Crediful. Here you will find all information related to home equity loans.


It’s slightly easier to qualify

As the price of houses has risen up, lenders have loosened the criteria for passing home equity loans. Many banks have decreased their credit score requirements for getting a home equity loan, but that does not mean they will not look after your credit score or income level. You will have to prove banks that you have required credit score and income to pay off the loan.

To have your home equity loan application approved, lenders generally look for a credit score of at least 700 and your total debt amount should be 43 percent or less than your total income.


Tax rules have changed

As per the new tax law, if you are using the home equity loan amount for remodeling project on the house tied to the loan, the equity interest will be only tax-deductible. The total amount cannot be more than $750,000 if your home equity debt along with your mortgage qualifies for the tax deduction.


There are real risks involved

A lender can take the possession of your mortgage if you are unable to pay off the loan payments timely. While the interest rate of home equity loan is relatively low as compared to mortgage loan, if you do not have a fixed rate loan, your monthly loan payment will rise along with your interest rate, and after 10 years when you start to pay your principal loan amount, it will significantly be higher than the present principal amount. Thus, it’s best to pay off your principal loan amount before the interest rates get higher so that it has minimum impact on your budget and do not cost more than the extra amount. Think of long-term scenario and plan accordingly.


The right way to use a home equity loan

For a responsible borrower, a home equity loan is a valuable tool. If you have a stable, reliable source of income and if you know that you will pay off your loan amount, then its low interest is a very good choice for you. A fixed-rate home equity loan can be used in many ways like some small or large purchases or pay for an unexpected medical bill. It is also very much useful in covering short-term costs like paying your college tuition fees.



Despite risks involved in home equity loan, it is a good option to cover all your basic needs and house related requirements. With a little commitment in paying off your monthly loan payments, you can easily pay your loan with a low interest rate. Make sure to understand the terms of the loan and then apply for it.