While many people think that borrowing against your home’s equity might negatively affect it, we’re here to tell you that’s false. In fact, borrowing against it can actually help you to build equity.
There are two ways in which you can borrow against your home’s equity: loans and lines of credit. A home equity loan offers you a lump sum of money for a duration of up to 30-40 years, whereas a home equity line of credit gives you a lump sum for a shorter term of 15 years. During this timeframe you can borrow as much or as little as you want (given the amount of the loan) with lower interest rates. In some cases, a certain amount of you home equity loan or line of credit may even be tax deductible.
So why wouldn’t people want to borrow against it?
Though it is a much more cost affordable option for borrowing compared to a traditional credit card, a home equity loan/line does secure your home as collateral. This form of borrowing isn’t for everyone. However, given the flexibility it provides you, the benefits can outweigh the disadvantages.
How much can you get?
Typically, a lender will give you up to 75% of the equity in your home, given you have good credit and other favorable lending criteria. As with any loan, a lender will look at your FICO score, your debt-to-income ratio, the equity in your home, and other factors.