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How a 100% Home Equity Loan Works

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A 100% home equity loan allows you to cash out the equity in your home up to 100% of the home’s property value. This can be beneficial if you need cash fast to pay off high interest credit card debt, college tuition or emergency medical expenses.

Borrow Against Your Home’s Equity

A home equity loan is a second mortgage on your property. It’s necessary to wait at least 6 months from the date you purchased your home to apply for a home equity loan since your lender will want to order a new appraisal. If you qualify for the loan, your lender will loan you the difference between the home’s current value and the amount of your original mortgage. For example, if your first mortgage loan is for $150,000 and your home appraises at $175,000, your home equity lender will loan you $25,000.

Lack of Equity

If your home is worth less than the amount of your primary mortgage, you have negative equity in your home and are not eligible for a home equity loan.

After You Borrow

Some home equity loans allow you to cash out a portion of your home’s equity. With a 1005 home equity loan, you receive all of your home’s equity. The downside to this type of loan is that you lose any progress you’ve previously made toward paying off your home loan. Second mortgage loans also traditionally carry a higher interest rate than primary mortgage loans.