An equity loan (often called a "second mortgage") allows you to borrow against the value of your home that is not already tied up in a primary mortgage. Unlike a primary mortgage used to purchase a home, an equity loan provides a lump sum for expenses like home improvements, debt consolidation, or education.
: A revolving credit line similar to a credit card where you borrow only what you need and pay interest only on that amount. Qualification Requirements equity loan mortgage
: A fixed-term loan that provides a one-time lump sum with a fixed interest rate, typically repaid over 5 to 30 years. An equity loan (often called a "second mortgage")
: Lenders often limit the combined total of your primary mortgage and equity loan to 80-85% of your home's appraised value. Qualification Requirements : A fixed-term loan that provides
Lenders typically evaluate your eligibility based on three primary factors:
: A common guideline is the 28/36 rule , where no more than 28% of your gross monthly income goes to housing costs and no more than 36% goes to total debt. Some lenders may allow a back-end DTI up to 43%.