Posted on: 2 February 2023
Do you need some extra cash for something specific? For example, you might need it to remodel your home or pay off debt. But, of course, you might need it for something else. When you encounter a time like this, you might consider borrowing money through a home equity loan. Getting cash through a home equity loan is helpful and ideal for many situations, but how much can you get? The answer is complex, as it differs for every situation. Here are several factors a lender considers before offering you an amount.
Lenders base it on a percentage of home value
The first thing to understand is that lenders base home equity loans on a percentage of a home's value. However, the percentage varies by lender, loan program, and individual. For example, one lender might loan up to 80% of the home's value, while another might lend up to 98% of the value. The lender will consider how much you already owe on the house to determine how much more you can borrow. So they'll need to know your home's value and your current loan balance. Then, they can view the percentage they'll borrow compared to these things.
They require an appraisal
Your lender will require a home assessment to determine your home's value. They call this an appraisal. This tells the lender how much your home is worth in today's economy and market. Of course, you'll have to pay the bill for this service.
They also consider your financial and credit information
Additionally, a lender will look at some of your personal information before determining how much to offer. In fact, these details determine if you qualify for a loan. Lenders consider two primary factors when analyzing your situation. First, what is your credit score? Your score tells the lender if they should issue a loan. They'll likely approve it only if you prove you're creditworthy through a high score.
Secondly, where do you stand financially? The lender might also want to see a breakdown of your assets, debts, and income. These details tell you where you stand financially and help lenders determine if they should approve loan requests.
Contact a lender
The best way to find out how much you can borrow through a home equity loan is to contact a lender. You can look for a lender that offers home equity loans. Then, you can contact them to learn more about the process.Share