Taking out a home equity loan for the wrong reason or at the wrong time could cost you big.
If you owe less on your home than it’s worth, you have equity. With a home equity loan, you borrow against that equity and pay the loan back in equal monthly installments for a preset number of years (typically, five to 30 years). The amount you can borrow is usually capped at 80% to 85% of available equity. For example, if your home is worth $300,000 and you owe $200,000, you have $100,000 in equity. That means you may be eligible to borrow $80,000 to $85,000 in a home equity loan.
When you take out a home equity loan, your home acts as collateral, meaning a lender can repossess your house if you fail to make payments. Home equity loans can be useful, but it is crucial to consider whether you