How Does a Home Equity Loan Work?

Home equity loans are simple interest, fixed rate loans, secured by a lien in second position on the title of your home. The amount of equity that is available for a loan is determined by the difference between the appraised value of your property and the balance on the first mortgage.

With a fixed rate home equity loan, the lender makes a one-time payment of the full amount that is borrowed, which is paid to you at the closing of the loan process. If you have an existing home equity credit line or a second mortgage on your home, it will need to be paid off with the proceeds of your new equity loan, so make sure to request a sufficient loan amount to include the pay off.