Home equity loans
Home equity is the actual value of the owner's stake in the home. It is the difference between the fair market value of the house and the outstanding mortgage and debt taken for purchasing, building or renovating the house. As the owner pays back the mortgage on the house or as property prices in the area increase, the home equity of the owner increases.
A home equity loan is a loan where the borrower uses the equity in their home as collateral. For personal loans, the interest rates can be very high, so home equity loans are used to finance major home repairs, college education or medical bills as the interest rate is usually lower. Most lenders provide home equity loans only to borrowers with a a good credit history and score, to reduce the risk of defaults.
Most home equity loans are for a shorter duration that house mortgages . They are called second mortgages since they are secured against the value of the property. Tax deductions are available for home equity loan interest in the United States
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