AAfter meeting certain requirements, any bank will offer you several options for applying for a loan depending on the value of a home.
A mortgage comes before you have an equity interest in the house and helps you buy it, but once bank liabilities are acquired, they also become equity, allowing you to borrow more money through a home equity loan.
Now, the most common type of mortgage is a 30 year mortgage, but there are also other options such as 15 year fixed rate mortgages and adjustable rate mortgages.
Mortgage Eligibility Requirements
- Achieve a minimum credit score that demonstrates a responsible payment history.
- Proof that you make enough money to cover other expenses, such as a car loan or credit card
- Achieve a minimum down payment
- Have enough cash to cover mortgage closing costs
Home Equity Loan
If you are paying off a mortgage or have already paid off your mortgage in full, a home equity loan is available. This is a type of second mortgage that allows you to use the value of your home to borrow more money.
In this regard, depending on your credit profile, the lender you work with and other factors, up to 80 or 85% of your principal can be borrowed.
Mortgage vs. Home Equity Loan
With a mortgage and home equity loan, you borrow money and promise to pay it back. If you break this promise, the lender can keep your house, as this is the collateral for both types of loans.
An important point to consider is that interest rates on home loans are generally higher than those on mortgages. This is because a home equity loan is usually the second mortgage and the first mortgage lender is the first to collect the money if your home is foreclosed.
If you need access to cash, but don’t want to add a second mortgage to your bottom line, refinancing may be the answer.
Remember that when you need to borrow money, your home can serve as collateral to access the money, but if you miss payments on a mortgage or home equity loan, the lender has the right to take possession of your home.