Home Equity Loans – Where Do I Start?

Whether you’re looking to make home improvements, take a dream vacation, consolidate debt, or make a large purchase, home equity loans are a popular option because they offer a large sum of cash up front. Although, there are a few steps to keep in mind before applying for a home equity loan – in which we’ve provided in this brief guide.

What is Home Equity?

Lone Star Credit Union determines equity using the full-appraised value of your home. The state of Texas allows for 80% of the value minus any existing mortgage loans to be used as collateral. Hence, home equity is what is used as a form of collateral for a financial institution to loan you a large sum of money up front.

What do I Need for a Home Equity Loan?

The home used for a home equity loan must your homestead (primary residence). The homestead must also be filed with the appraisal district in your county of residence. Lone Star Credit Union requires a, “full-on appraisal” for home equity loans which includes getting your home assessed by a home inspector (appointed by LSCU) to determine your home’s value. This inspection is included in the closing fees for a home equity loan. Additional documents may be required after loan approval.

What’s the Difference between Lenders?

Typically, there are usually three differences between home equity Loan lenders which include the following:

1. Interest Rates
   1. Interest Rates vary between Financial Institutions – you can find Lone Star Credit Unions rates by going to the rates webpage. On a side note, the interest rates from a home equity loan may be tax deductible* but its best practice to verify with a certified tax advisor for more information.

1. Closing Costs
   1. A home equity lien is considered a mortgage loan which has additional closing costs in order to finalize the process. LSCU’s closing fees are highly competitive and typically lower than other financial institutions.
2. Length of Approval Process
   1. While Lone Star Credit Union generally closes within 20 to 30 days, other financial institutions may take up to 2 months.

How much of a Home Equity Loan can I get?

Generally, Lone Star Credit Union offers up to 80% loan to value financing on home equity loans although it is assessed on a case-by-case basis. To estimate the Loan to Value Ratio amount of equity eligible to borrow from your home, multiply the full-appraised value of your home by .80 (80%). Then subtract any existing lien balance(s). The remaining amount is the maximum home equity loan you could potentially obtain.

Loan to Value Ratio

Loan to Value Ratio is determined by multiplying the full-appraised value by 80% then subtracting all liens.

Home equity loans from Lone Star Credit Union start at a minimum of $25,000** and offer flexible options such as fixed rate, term, and monthly payments. For lending options with minimums lower than $25,000 Lone Star Credit Union also offers personal loans, personal lines of credit, or credit cards. If you’d like more information on home equity loans or any of our products and services,  click the button below to email us!

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* Please check with your certified tax advisor for more information.

** Minimum amount to be borrowed applicable as of 3/1/2020