home equity loan [hohm / k-wi-tee / lohn]
(noun)
A loan secured by equity value in the borrower's home.
But what is a home equity loan, really?
A home equity loan is often referred to as a second mortgage or “borrowing against your home”. This type loan allows you to tap into your home's built-up equity, which is the difference between the amount your home could be sold for and the amount that you still owe.
Here’s something you may not know. Home Equity Loans do not necessarily have to be used to finance home improvement. Use the money to pay for a new car or you’re your child to college. This is all perfectly legal.
Most lenders will agree that the Home Equity Loan is a good option for most lenders for two main reasons:
1. Most borrowers will find the interest rate lower than other more traditional loan rates.
2. The interest you pay on the loan is usually tax-deductible. But beware. This loan entitles the lender to repossess your home, should you find yourself unable to keep up with payments.
