A home equity loan is a second mortgage on your home. Home equity loans are a very powerful tax-deductible financial tool. Since home equity credit is a type of mortgage, it shares lower interest rates and the tax advantages of mortgages. You can borrow up to $100,000 of your available home equity for virtually any purpose, and, in most cases, 100% of the interest paid each year is tax deductible.
When to apply for a home equity loan?
A home equity loan is a serious move because it is a second mortgage on your home. If you are seeking to pay off credit card bills, car payments, or college tuitions, you have good reasons to seek a home equity loan.
The best part about equity loans is that you can now
borrow up to 100% of your home's equity and, in some
situations, up to 125%. In the past, equity loans were
usually limited to a total combined Loan-to-Value (LTV)
ratio of 80%. For example, if your home was worth $100,000,
the combined total of the first mortgage and the home
equity loan (second mortgage) could not exceed 80% of
that value, or $80,000. If the balance on the first
mortgage was $60,000, you could borrow up to $20,000
on a home equity loan. But at East West Mortgage Company,
we are now offering loan programs that allow you to
borrow up to 125% of your home's equity (value).
