Home Equity Loans 101



Do you imagine updating your home with a new porch, finished basement or are you looking to finally update your kitchen? High costs might make a big remodel seem like a dream but using the equity in your home may make that dream a reality.


How can I use a home equity loan?

People use a home equity loans for many types of things, some of the most common are home improvement projects, college tuition costs and debt consolidation. Another way to use home equity is for large expenses due to a major life event like a wedding, new car or unexpected medical expenses.


What are my options?

Marine Bank offers two types of financing options for home equity loans, a home equity loan or a home equity line of credit. While both can be used for home improvements, there's a slight difference in how they each work. 

A home equity line of credit works like a credit card. A borrower is approved for a certain limit, and charged interest for only the amount that is used. Funds are drawn when needed and paid back in smaller payments similar to a credit card. Home equity lines of credit are tax deductible and have low variable rates.

A home equity loan is more like a car loan. It’s a fixed rate and has a set amount on monthly payments. The entire loan is given upfront and paid back over the course of 10-15 years. These loans are easier to budget and are usually used for bigger projects.


How much can I borrow?

Home equity is the difference between the appraised value of a home (how much a house would sell for) and a current mortgage balance.

A borrower's credit score determines their rate options. The better a borrower's credit score, the better rate and term options they get. Here's more information on how credit scores work. For example, A-rating credit scores are consumers who have no late payments or maxed credit cards for at least 12 months. Having a couple late payments or overdrawn credit cards won’t completely ruin someone's credit score, but they will not have as many options. Here are five ways you can work on improving your credit score today. 

Before applying for a home equity loan, borrowers should figure out the estimated costs of the project. This will help a lender determine what kind of loan will work best the borrower's situations. Add 10% more in a budget if contractors are being used and add 20-30% if you are doing it yourself. Other fees may include things like permit fees and equipment rentals along with other inevitable surprise costs.

Learn more about Marine Bank's home equity loan programs or make an appointment with our Home Equity Loan Specialist, Doug Ferguson, for more information on home equity loans.

Written By: Brooke Thomas



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