|Lines & loans, side by side||HELOC||HELoan|
|Keep your existing mortgage|
|Use funds for any purpose***|
|Interest rate||Variable APR||Fixed APR|
|No prepayment penalty|
|Funding in as few as 11 days**|
|Funding in one lump sum|
|Draw funds as you need them*|
|Interest-only payment options2|
|Get started||Get started|
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Home equity is the difference in how much your house is worth and the balance of your mortgage and other liens.
Home equity is calculated by determining your home’s fair market value, then subtracting the amount you still owe on your mortgage (and on any other loans or liens that are tied to your home). Whatever is left is your home equity. Fair market value is the price your home would sell for in an open and competitive market. You can use an online home appraisal and a competitive market analysis to estimate your own home’s value. When you apply for a home equity line of credit or home equity loan, your lender will generate their own appraisal using an independent third-party appraiser or valuation tool.
You can use your home’s equity to access an exclusive set of financing options, which include HELOCs and HELoans.
HELOCs and HELoans use the equity in your home as collateral to access larger amounts of money at lower interest rates. Many people use home equity lines of credit and home equity loans to further grow the equity in their home by completing home improvements, renovations, and additions. In other words, by using home equity products to complete work on your house that can increase its fair market value, you may effectively grow your home’s equity while you leverage it to access capital at low rates.
Home equity is calculated by subtracting the total amount you owe on your mortgage from your home’s “fair market value”.
If you own your home outright, then its entire fair market value would count towards your equity. Fair market value is the price your home would sell for in an open and competitive market. You can use an online home appraisal and a competitive market analysis to estimate your own home’s value. When you apply for a home equity line of credit or home equity loan, your lender will generate its own appraisal.
A HELOC is a credit line that typically has a variable APR, and a HELoan is a term loan that typically comes with a fixed APR.
HELOCs and HELoans are secured by your house, which allows borrowers to access larger sums of money at lower rates. A home equity loan is a bit like a second mortgage: it’s a one-time loan that you’ll start repaying immediately through fixed monthly payments. On the other hand, a home equity line of credit lets you borrow when you need to instead of all at once. Ultimately, a home equity loan is more rigidly structured while a HELOC is more flexible.
To figure out how much equity you have in your home, you’ll need to determine how much your house is worth in the current market and subtract however much you still owe on your mortgage.
The difference between these two numbers is your home equity. You can calculate how much home equity you have in just a few seconds by using Prosper’s Home Equity Calculator.
In some cases you can use your home’s equity to access financing products, such as HELOCs or HELoans, that can be used to consolidate debts***.
Because you use your home as collateral for HELOCs and HELoans, you can often borrow funds at a lower interest rate than through personal loans or credit cards. This can lead to major savings and can be a great way to pay off debt.
You should speak to a tax professional regarding the tax benefits of HELOCs and HELoans.
It is possible for your home’s value to go down, which could affect its assessed “fair market value” and your resulting home equity calculations.
While real estate usually increases in value over time, it is always possible that market volatility or local alterations could impact the size of your home equity.
Home equity itself does not affect your credit score.
Borrowing against your home equity could affect your credit score in a negative or a positive way, depending on whether you make timely monthly payments. But remember, checking your rate for a home equity product like a HELOC or HELoan through Prosper does not affect your credit score at all.
More homes in the US are hitting historical valuations than ever before. Get ahead of the curve and unlock your home’s equity today!
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*Eligibility for a home equity loan or HELOC up to the maximum amount shown depends on the information provided in the home equity application. Depending on the lender, loans above $250,000 may require an in-home appraisal and title insurance. Depending on the lender, HELOC borrowers must take an initial draw of $50,000 at closing; subsequent HELOC draws are prohibited during the first 90 days following closing; after the first 90 days following closing, subsequent HELOC draws must be $1,000, or more, except in Texas, where the minimum subsequent draw amount is $4,000.
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