If you have equity in your home, there are many ways to unlock the wealth it’s accumulated. You can try to apply for a home equity loan or home equity line of credit (HELOC), but most banks make it difficult for individuals with a poor credit score to get approved.
SKYDAN Equity Partners, however, does not care if you have a bad credit score, high debt, a job loss, or tax lien, and can help you unlock your home equity without enduring the stresses associated with traditional lending institutions.
Here we’ll go over the differences between HELOCs, home equity loans, and SKYDAN’s program so you can make more informed decisions when it comes to your finances.
What Is a Home Equity Loan?
A home equity loan is often referred to as a “second mortgage.” Many homeowners resort to this lending method after already taking out their first mortgage in order to borrow against the equity that they’ve built in their property. After the market value of the home is determined through a lengthy appraisal process, the loan is approved and the homeowner receives a lump sum of money that must be paid back over the next 10 to 30 years via fixed payments, depending on the conditions of the loan. Keep in mind that most home equity loans have fixed interest rates.
Home Equity Loan Collateral and Terms
While most home equity loan terms vary drastically on a case-by-case basis, there are some common throughlines of which you should be aware:
- First mortgage payments: In order to qualify for a home equity loan, you must have equity in your home, meaning your first mortgage must be paid down enough.
- Amount: The exact amount of the loan is dependent on a number of factors, including combined loan-to-value ratio (i.e., 80-90% of the home’s value), credit history, and employment status.
The riskiest part of a home equity loan is that you’re borrowing against the value of your home. In other words, if you cannot make the payments, you will lose your home. Taking out a home equity loan is not advisable unless you are in a secure financial position already.
What Is a HELOC?
A home equity line of credit, or HELOC, is different from a home equity loan because you don’t receive a lump sum of money, but rather access to a revolving line of credit. In other words, you can only take as much as you need with a HELOC.
HELOCs have two periods: a draw period and a repayment period. During the draw period, which typically lasts up to 10 years, you are able to withdraw funds to pay for life expenses or home upgrades. During the repayment period, which can last up to 20 years, you are responsible for paying back the withdrawn funds. Keep in mind that some HELOC terms may require small repayments during the draw period, but they are usually interest-only. The payments will significantly increase during the repayment period.
HELOC Collateral and Terms
While a home equity loan has a fixed interest rate, HELOCs have variable ones depending on the credit line’s usage. Think of a HELOC as a credit card; you’re able to spend as long as you’re able to pay it back during the payment period. The main difference is that a credit card is unsecured, meaning it’s not attached to an asset, whereas a HELOC is secured against the value of your home. This means that much like a home equity loan, if you are unable or unwilling to make payments, you will lose your home.
Because the interest rates are variable in a HELOC, monthly payments can be unpredictable, since they are tied to market rates. Additionally, it’s of utmost importance to budget during the withdrawal period, since it’s quite easy to impulse spend up to the credit limit.
SKYDAN Equity Partners’ Home Sale/Leaseback Program
SKYDAN Equity Partners is not a bank, not a mortgage company, and certainly not a lender. We partner with qualified homeowners to provide unique alternatives to home refinancing. Our home equity leaseback program allows you to sell your home and continue living in it for up to two years with no monthly payment. Once the term has expired, you can either buy your home back for the original purchase price plus the deferred rent or sell your property and gain any value over and above this amount. Here’s how it works:
If you’ve been turned down by banks because of high debt, bad credit, loss of a job, or a tax lien, SKYDAN Equity Partners is here to help you unlock your home’s equity. When banks say no, we say yes.
Contact SKYDAN Equity Partners today to learn how to get started.