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Lenders that provide Home Equity Loans lend solely based on the appraised value of the home, not one's credit score, job history or income. This means that you do not need to 'qualify' like you would for traditional bank financing.
When taking out an Equity Loan the borrower will receive the funds in a lump sum. The borrower will then be required to make monthly payments on this sum until the loan is repaid. The interest rates are typically slightly higher than the best market rates available to prime borrowers. This is the biggest downside to Equity Loans.
Home Equity Loans are a good option for seniors that can afford a monthly payment and require a larger amount than a Reverse Mortgage can provide. Equity lenders generally do not lend beyond 65% - 75% of the appraised value of the home.
- Borrowed based on the value of your home NOT your credit score or job history
- You can borrow up to 65 - 75% of your home’s appraised value
- Higher interest rates than a prime mortgage
- Requires a monthly payment
- Only available in one lump sum