Put your Home Equity to Work for You
You have several options to leverage the equity in your home. Whether for home improvements, college costs, or for any other reasons... Home Equity Loans put the cash in your hands and then you decide what to do with it.
HELoanHome Equity 2nd Loan (HELoan) – This is a fixed loan with a fixed monthly pay back. Lenders typically limit these to no longer than a 15 year payout. The fixed rates are very attractive but a bit higher than a typical home loan.
Both the HELoan and HELOC can be setup with almost zero closing costs. Both options simply piggy- back on top of your existing home loan.
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HELOCHome Equity Line of Credit (HELOC) – This option works like a credit card or any other line of credit. Once you are approved and the HELOC is setup, you can draw against it or let it sit untouched until needed. You can pay back draws, and later request new draws without having to go through another approval process. Payback periods and interest rates are determined at the time you make a draw and typically you have more than one payback option. Very large HELOC draws may offer fixed interest rate options but typically you pay an adjustable interest rate that can go up or down with the overall rate markets.
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Cash-Out RefinanceAnother
option is to take your existing loan(s) against your home refinance at low
current market rates, and add cash out.
This option will have higher closing costs than a HELoan or HELOC, including
the typical title insurance and closing fees.
This option is more attractive if you are getting rid of a higher interest
rate current loan. Plus your equity cash
is added on at the same low fixed rate, with pay back periods up to 30 years.
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Home Equity Limitations
Home equity loans secured by your homestead have several limitations set by Texas law. This Notice Concerning Extensions of Credit in Texas lays out the details, but the big three are:
Only one home equity at a time. Can’t do a cash-out refinance, HELoan or HELOC now, and then come back later to add another home equity on top of it. The existing equity loan must be paid off and rolled into any new equity loan request.
12 month waiting period. If you close on an equity loan today, you must wait 12 months to close on another equity loan. (Need more cash out? You have to wait 12 months to get it.)
80% Loan-toValue Limit – the combined total balances of a new equity loan request and any existing home loans, cannot exceed 80% of the current “as is” market value of the house (market value before any improvements).
Only one home equity at a time. Can’t do a cash-out refinance, HELoan or HELOC now, and then come back later to add another home equity on top of it. The existing equity loan must be paid off and rolled into any new equity loan request.
12 month waiting period. If you close on an equity loan today, you must wait 12 months to close on another equity loan. (Need more cash out? You have to wait 12 months to get it.)
80% Loan-toValue Limit – the combined total balances of a new equity loan request and any existing home loans, cannot exceed 80% of the current “as is” market value of the house (market value before any improvements).
