Ways to Use Home Equity Loans in Denver
By Allison E. BeattyLocal Lender Columnist
Nov 22, 2006
Considering getting a home equity loan to remodel your Denver home? Here's an overview of how home equity loans work.
As homes continue to appreciate in the Denver marketplace, many people are tapping into their home equity to pay for a variety of expenses. Among the popular ways to use a home equity loan or line of credit are:
- Kitchen or bathroom remodeling
- Home additions
- New roofs and gutters
- Educational expenses
- Vacations and new cars
Home Equity Loans vs. Lines of Credit
There are two ways to access your home equity - a loan or line of credit. Both are second mortgages on your home and may be tax deductible. (See your tax consultant for details.) Here are the key differences:- A home equity loan has set payments for a set period of time. If you are concerned about interest rates rising, then a loan will offer more security.
- A home equity line of credit allows you to access as much money as you want within a preset limit. The benefit is that you only pay interest on the amount you access. This allows you to renovate your Denver kitchen, and then access other funds a few months later without added paperwork.
How Much Money Can You Access?
Mortgage lenders typically lend you 80 to 85 percent of the equity in your home. If you have $50 thousand in equity, for example, you could tap into roughly $40 thousand. The mortgage lender will have an appraisal done to show:- The estimated market value of your home.
- The value of homes in your neighborhood, based on recent sales and current home listings.
Finding a Mortgage Lender
When shopping for a home equity loan or line of credit, look for a mortgage lender that offers:- Competitive mortgage rates
- Flexible application and loan terms – such as "no doc" loans that require little to no paperwork
- Quick credit and income verification
About the Author
Allison E. Beatty is a syndicated real estate writer who has been writing columns for 15 years.