100% Home Equity Loan
A 100% home equity loan allows you to the total home value of your home as cash.
Loan to Value (LTV)
All lenders establish a maximum LTV. For example, if your house was appraised at $200,000 and your lender had established an LTV of 80%, then your total outstanding loans could add up to $160,000. (.80 x 200,000)
100% Home Equity Loan
If your lender allowed 100% LTV and you had loans totaling $160,000 on a $200,000 home, this means you could obtain another $40,000 as a home equity loan.
Advantages to having access to 100% of the equity in your home include:
- You have access to more funds than other sources (like credit cards)
- Home loans have lower interest rates than credit cards or unsecured personal loans.
- Generally, the interest on home loans is tax deductible whereas on credit cards and personal loans it is not
100% Home Equity Use
Financial experts recommend that you do not tap into your home equity for just anything. Some wise uses of the equity might be:
- Making home improvements because they increase your home’s value
- Consolidating higher interest rate credit cards under the lower interest rate home equity loans
- Purchasing a big ticket item
- Paying off major expenses like medical bills
Whenever you tap into your home equity there is some risk. You could lose your home if circumstances cause you to default on the loan.
So, use your home equity wisely.
Steve Wyrostek -HomeLoans.org Expert A 20 year plus veteran of the insurance industry, Steve managed departments in the personal and commercial lines areas of major insurers. He’s familiar with how insurance—ranging from boat to workers compensation—works.
