Home equity loan

Do you need to tap into your homes equity to pay for a home remodeling project or to pay off a credit card? A home equity loan is a fixed or adjustable rate loan that is secured by the equity in your home. With a home equity loan, you borrow a lump sum of money to be paid back monthly over a set time frame, much like your first mortgage. The terms home equity loan and second mortgage are often used interchangeably.

The process for a home equity loan is similar to your first mortgage. The closing costs (often 2-3 percent of the loan amount) are usually lower and, although the interest rate is higher on a home equity loan, the interest paid is tax deductible.