Home Equity Loan Terms
What are the terms, rates, and maturity amounts of a home equity loan?
The terms of a home equity loan (HEL) are usually akin to a simple fixed-interest loan. A HEL is characterized by the following:
The amount you can borrow is usually 85% of the home equity.
The loan proceeds are paid out in a lump sum.
A loan term can be 5–20 years.
The interest rate is fixed throughout the loan's lifespan.
The loan is amortized over its lifespan with regular, same-value payments. These payments pay for both the interest and principal of the loan.
A home equity loan is a second mortgage, so you’ll be charged again for application fees, closing fees, etc. The interest rate on a home equity loan is determined by:
Your credit score and income
Value of your home
Loan to value ratio of your home