What is a home equity loan?
If you were to ask around, you’d probably find friends, family, colleagues and neighbours who have taken a home equity loan at some point in their lives. You may have heard them call it something else because a home equity loan is often referred to as either a second mortgage or a HELOC (home equity line of credit). A home equity loan is both of these things, quite simply because both second mortgages and HELOCs require that your home have equity.
A home equity loan/second mortgage uses your home as collateral but without changing anything about your first mortgage. The reliance on home equity to qualify actually trumps credit history or how much income you’ve got. As a result, eliminating these as deciding factors means a higher rate of approvals. Don’t know if you’ve got home equity? Don’t worry, keep reading – we’ll get to that soon.