What is a home equity loan?

A home equity loan is a type of loan that allows homeowners to borrow against the equity or value they have built up in their homes. It provides a way to access cash by using one's home as collateral. The loan amount is determined by the home's current market value minus the outstanding mortgage balance. With a home equity loan, borrowers receive a lump sum amount, which can be used for various purposes like home renovations, debt consolidation, education expenses, or unexpected expenses. Repayment is typically made over a fixed term with regular monthly payments. Home equity loans offer competitive interest rates and potentially tax-deductible interest payments, making them a flexible and cost-effective borrowing option for homeowners.