Home Equity in Relation to Home Loans
What is home equity?
Home equity is value built up from paying down the mortgage of a home while it appreciates in price. It is the difference between the market price of a home and the debt attached to it, like a mortgage. Home equity is the portion of your home that you actually own.
Home equity can be used to secure a loan. It can either be a home equity loan or a home equity line of credit. A home equity loan is characterized by a fixed term and a fixed interest rate on a single lump sum. A home equity line of credit is a fund from which you can draw from multiple times and has a variable interest rate. Home equity loans have low rates because they are secured by the property.