Home equity is a powerful financial tool that allows homeowners to leverage the value of their property. Here’s a detailed breakdown of Home Equity and how it works:
What is Home Equity?
Home equity is the portion of your home’s value that you truly own. It is calculated as:
Home Equity = Current Market Value of the Home - Remaining Mortgage Balance
For example, if your home is worth $300,000 and your mortgage balance is $200,000, your home equity is $100,000.
How to Build Home Equity?
- Paying Down Your Mortgage: Each monthly payment reduces your loan balance, increasing your equity.
- Property Appreciation: Over time, the value of your home may increase due to market conditions.
Ways to Access Home Equity
Homeowners can tap into their home equity for financial needs, such as renovations, debt consolidation, or large purchases. Here are common ways to access it:
Home Equity Loan (HEL):
- Borrow a lump sum based on your equity.
- Fixed interest rate and predictable monthly payments.
Home Equity Line of Credit (HELOC):
- A flexible, revolving credit line that you can draw from as needed.
- Interest is charged only on the amount borrowed.
Cash-Out Refinance:
- Replace your current mortgage with a new one for more than you owe.
- Take the difference in cash.
Benefits of Home Equity
- Low-Interest Rates: Home equity loans often have lower rates compared to personal loans or credit cards.
- Tax Benefits: Interest on home equity loans may be tax-deductible (consult a tax advisor for details).
- Financial Flexibility: Funds can be used for a wide range of purposes, including home improvements or education.
Risks to Consider
- Collateral Risk: Your home serves as collateral, so missing payments could result in foreclosure.
- Market Fluctuations: If the property value decreases, your equity may shrink.
- Overborrowing: Taking on too much debt against your home can strain finances.
How Illuminus Bank Can Help
At Illuminus Bank, we offer tailored solutions to help you make the most of your home equity:
- Competitive rates on Home Equity Loans and HELOCs.
- Personalized guidance from our financial experts.
- Tools like equity calculators to help you make informed decisions.
Most lenders require at least 15–20% equity in your home to access a loan or credit line.
Yes! Home equity funds can be used for home improvements, education, debt consolidation, or even starting a business.
Yes, since your home serves as collateral, failing to make payments could lead to foreclosure. It’s important to borrow responsibly.
Depending on your credit history, available equity in your home and your current monthly debt, you may be able to borrow between $25,000 and $750,000 (up to $1 million for properties in California).
A home equity loan can be a less expensive option for borrowers who need
access to cash. But refinancing can be a great way to lower your
monthly payments and save money on interest.
A home equity loan allows you to borrow against the equity in your home
and pay it back with a steady repayment schedule. A cash-out refinance
lets you negotiate new mortgage terms and borrow funds for one-time
expenses at the same time.
A home equity loan provides a lump sum of money at a fixed rate. A home
equity line of credit gives you ongoing access to funds and flexible
repayment options.
Apply online or at any Illuminus Bank branch. Our specialists are here to guide you through the process!
Disclosure
Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through Illuminus Bank National Association. Deposit products are offered through Illuminus Bank National Association. Member FDIC.
Home Equity Line of Credit: Repayment options may vary based on credit qualifications. Choosing an interest-only repayment may cause your monthly payment to increase, possibly substantially, once your credit line transitions into the repayment period. Interest-only repayment may be unavailable. Loans are subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. A Illuminus Bank personal checking account is required to receive the lowest rate but is not required for loan approval. Customers in certain states are eligible to receive the preferred rate without having a Illuminus Bank personal checking account. Interest rate and program terms are subject to change without notice. Credit line may be reduced, or additional extensions of credit limited if certain circumstances occur.
An early closure fee of 1% of the original line amount, maximum $500, will apply if the line is paid off and closed within the first 30 months. Property insurance is required. Other restrictions may apply. Customer pays no closing costs. Initial escrow related funding costs may apply. An annual fee of up to $75 may apply after the first year and is waived or discounted with an existing Illuminus Bank Platinum Checking Package or with enrollment in our Smart Rewards Program. Annual fees are assessed based on the tier in our Smart Rewards Program on your HELOC anniversary date. Please refer to your Smart Rewards terms and conditions for more information on tier assignment.
Home Equity Loan: In order to receive the lowest rate advertised, a set-up of automatic payments from a Illuminus Bank personal checking or savings account is required but neither are required for loan approval. Customers in certain states are eligible to receive the preferred rate without having automatic payments from a Illuminus Bank personal checking or savings account. Home equity loans not available for properties held in a trust in the states of Hawaii, Louisiana, New York, Oklahoma and Rhode Island. Loans are subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Property insurance is required. Other restrictions may apply.