If you have equity in your home, you may be able to borrow against it. The most common ways to do that are by taking out a home equity loan or a home equity line of credit, commonly referred to as a HELOC.
There are important differences between the two, but the similarities are that you have to pay interest on both, and you will incur more debt in addition to your original mortgage with both. Your home is on the line as collateral for both types of loans. If you can’t repay either loan, you will default on it. If this happens, the lender can begin foreclosure proceedings.
Home equity loans are second mortgages. You borrow a set sum of money and repay it with interest over a term of anywhere from five to 30 years. The interest rate is fixed, meaning your monthly payments are always the same.
HELOCs are like credit cards. The lender loans you a sum of money and you draw money out as you need it. For a set period of time, normally 10 years, you can continue to draw money out while making interest-only monthly payments. Once the draw period ends, you have to start repaying the loan. That can take up to 20 years.
The best home loan interest rates on HELOCs are usually variable. That means the rate of interest you’re paying each month can go up and down a fair deal.
You should not assume you can borrow 100% of your home equity with either type of loan. Those days are pretty much gone. Generally speaking, the amount a lender is willing to risk can be anywhere from 80% to 90% of your equity depending on your credit score, debt-to-income ratio, and payment history, along with other factors.
Calculating the amount you may be able to borrow is not complicated.
You have a home appraised for: $300,000 x 85%
85% of its appraised value is: $255,000
Your mortgage amount: – $200,000
The potential loan amount: $ 55,000
Average Interest Rates for Home Equity Loans
Because home equity loans and HELOCs are second mortgages, they carry greater risk for lenders. That means the best home loan interest rates are usually higher for these loans than for any first mortgage.
The information below assumes you borrowed $25,000 at 80% loan-to-value (LTV).
|5 year fixed||5.28%||3.50% – 8.63%|
|10 year fixed||5.60%||2.99% – 9.99%|
|15 year fixed||5.82%||2.99% – 9.03%|
|HELOC||5.61%||3.50% – 8.63%|
Rates on 5-year loans are lower than those with longer repayment plans. While you won’t pay as much in interest, you’ll probably see higher monthly payments.
For example: If you borrowed $25,000 for 5 years at 5.28% fixed rate of interest, your monthly payments would be $474.99. At the end of 5 years, you will have paid $3,499.67 in interest for a total repayment of $28,499.67.
If you borrowed $25,000 for 10 years at 5.60% fixed rate of interest, your monthly payments would be $272.56. At the end of 10 years, you will have paid $7,706.74 interest for a total repayment of $32,706.74.
If you borrowed $25,000 for 15 years at a 5.82% fixed rate of interest, your monthly payments would be $208.54. At the end of 15 years, you will have paid $12,537.34 in interest for a total repayment of $37,537.34.
(All calculations above were made using the saving.org loan payment calculator.)
How Does Illinois Compare to Other States Around the Nation?
If you assume a 5-year loan of $25,000, you will see that Illinois falls in the mid-range when compared to other states.
3.74% – 7.74%
|Michigan||5.89%||2.99% – 6.64%|
|Ohio||5.75%||3.25% – 6.75%|
|Alaska||6.93%||6.75% – 7.03%|
|Nevada||6.17%||5.50% – 9.03%|
|Hawaii||3.00%||3.00% – 3.00%|
|Massachusetts||4.26%||3.25% – 5.99%|
If you borrowed $25,000 for 5 years at a 5.71% fixed rate of interest in Illinois, you would have monthly payments of $479.96. After 5 years you would have paid $3,797.36 in interest for a total repayment of $28,797.36.
You need a FICO score of 680 or higher to get the best rate. Otherwise, you may be facing a higher interest rate than the average. If the best an Illinois lender can offer you is a 7.74% loan for 5 years, you’ll be looking at monthly payments of $503.80 and $5,228.29 in interest over 5 years.
This is over and above the monthly payments you’re making on your first mortgage at the same time. As you can see, the interest you pay, even over the relatively short period of 5 years, adds up to a substantial amount.
Instead of paying interest on top of monthly payments, consider the option of getting FAST CASH with ZERO INTEREST and NO MONTHLY PAYMENTS.
The Skydan Equity Loan Program
Why throw your money away on interest? You won’t pay any interest with our program. You won’t have to worry about getting denied altogether or paying sky-high interest rates because of your credit score, payment history, debt-to-income ratio, or a sudden job loss.
Because Skydan isn’t a mortgage company, bank, or traditional lender, we won’t ask you for your tax returns, W2s, or 1099s. We don’t need that information to qualify you for our program. The only thing we need to know is how much equity you have in your home.
We know times are tough. Tens of millions of Americans are facing financial hardship because of COVID-19. We can help homeowners with equity in their homes. And we won’t do it by adding to the financial burdens they’re already facing.
Skydan is a sale and leaseback program. This sell house and rent back option is a viable home equity loan alternative, giving you the cash you need to pay bills, consolidate loans, pay medical expenses, or just keep your head above water until your circumstances improve.
We’ll buy your house at fair market value, and rent it back to you (deferring the monthly rent for up to two years). After two years, you can buy the house back from us (minus the original purchase price + rent). You can decide to sell the house and keep the profits (minus our investment).
If you live anywhere in the Chicagoland area, give us a call today. Our team of professionals is ready to evaluate your home, make you an offer, and get you the NO INTEREST ADDED cash you need fast and hassle-free.