What is a home equity loan?

A home equity loan is a type of loan that allows home owners in Virginia to borrow money against the equity in their home. Home equity is the difference between the appraised value of a property and the outstanding balance on any mortgages or liens on that property. A home equity loan in Virginia is a second mortgage—a loan taken out after the original mortgage—that allows home owners to borrow against the equity that has built up in their homes. Depending on the lender, the amount borrowed can be up to 85 percent of the equity in a homeowner’s property. The loan can be used for a variety of purposes such as home improvements, college tuition, or debt consolidation. The interest rate for a home equity loan may be fixed or variable, based on the terms of the loan agreement. A home equity loan may be a good option for a homeowner who needs to borrow a significant amount of money and is able to manage the associated risk. In Virginia, the loan must be secured by a first lien on the property. A home equity loan should not be confused with a home equity line of credit (HELOC), which is a revolving line of credit with a variable interest rate based on the prime rate. Before taking out a home equity loan, Virginia homeowners should review the terms and conditions closely and consider the potential risks of borrowing against their home.

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What is a home equity loan?

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