Let’s crunch the numbers

A home equity loan can be a huge help in reaching your financial goals. Whether you need to pay off debt, want to complete a major remodeling project on your home, or simply want access to emergency funds, taking out a second mortgage or cash-out refinancing could be the key.

Before deciding to take out a loan, however, it’s important that you first get a handle on your current financial situation, a major factor being how much equity you currently have in your home. Are you eligible for a loan? If you are, for how much? To make it easier to answer these questions, we’ve created a simple and fast home equity loan calculator:

Put simply, your home equity is the difference between your home’s current value and the amount you still owe on your mortgage. Most home equity lenders will only lend up to 80 to 85 percent of your home’s value, and some lenders will require an appraisal to confirm this figure. In most cases, you’ll need to have at least 20 to 30 percent equity in your home to take out a home equity loan. Whether you qualify for a loan or not will depend on your home equity, your home’s value, your financial standing and the lender’s requirements.

Do your results match your financial goals?

After using our calculator and getting your results, consider: will a home equity loan adequately help you achieve your goals? Or is it a bad match?

Like all loans, home equity loans, HELOCs, and even cash-out refinances each come with their own lists of pros and cons. Which one you should opt for, if any, should be elucidated by your reasons for getting a loan to begin with. Here’s a quick list of some of the top reasons homeowners consider home equity loans:

• To pay off debt
• To pay for a remodeling project
• To pay for college, retirement, or business costs
• To have access to an emergency fund for a set time period
• To get a lower interest rate

Whether your goals align with one of these or are slightly different, you should now look into the different types of home equity loans and decide which will meet your needs most efficiently. For example, if you’re looking to start a major remodel and you have the credit score to qualify, a home equity loan might be the best choice because it offers a lump-sum payment. Conversely, a HELOC is typically best for homeowners looking for an emergency fund option that will be available for several years.

What’s next?

After researching each loan type, confirming that you have enough equity in your home to be eligible for a loan and checking that the typical amounts offered through these loans will be sufficient to meet your goal, the next step is to start shopping lenders. Each lender offers differing rates, closing costs, loan options, and application procedures, all of which you should consider. We always recommend homeowners shop around rather than settling on the first lender they come across -- by considering all your options, you’ll be able to get the best deal possible.

And that’s where we come in. At BestHomeEquityLoans.com, we offer free comparisons of the top lenders so you can easily see which one is best suited for your needs. Through our curated ratings and reviews, we offer an unbiased look at how each company stacks up against each other. Once you’ve found a lender you’re interested in, simply click the listing, check out their rates, and get started!