How do home equity loans work
A home equity loan lets you borrow a lump sum against the value you've built in your home. You repay it in fixed monthly payments over a set term, usually between 5 and 30 years.
Your home equity is the difference between your home's current market value and what you still owe on your mortgage.
Example: If your home is worth $400,000 and you owe $250,000, you have $150,000 in equity. Most lenders allow you to borrow up to 80% to 85% of that equity.
A home equity loan is simple and predictable. After approval, you receive a one-time lump sum and repay it with fixed monthly payments over a set term.
Your interest rate and payment amount stay the same for the life of the loan, making it easy to plan and budget.
Receiving Your Funds
When your loan is approved, you receive the full amount in a single lump sum. There are no draw periods or revolving credit lines.
You get the money once and start repaying it right away.
Making Your Payments
Your monthly payment stays the same for the life of the loan. Each payment covers both principal and interest.
This makes budgeting straightforward because your payment never changes.
Repaying Over a Fixed Term
Repayment terms typically range from 5 to 30 years. A shorter term means higher monthly payments, but less interest paid overall.
A longer term lowers your monthly payment but increases the total interest cost.
Axos Home Equity
Unlock your home equity today.
Turn your home equity into cash with a lump sum at a fixed rate. Use it for debt consolidation, home upgrades, and more.
Because your home is used as collateral, a home equity loan carries more risk than an unsecured loan. If you fall behind on payments, the lender may have the right to foreclose on your property.
Other risks to consider include:
Closing costs, that typically range from 2% to 5% of the loan amount.
Reduced home equity, which can limit financial flexibility if home values decline.
Long-term commitment, with fixed monthly payments lasting for several years.
Before borrowing, consider your long-term financial goals and only borrow what you can comfortably repay.
Home equity loans offer a straightforward way to access the value you’ve built in your home, with predictable payments and a fixed repayment schedule.
While they can be a smart option for large, planned expenses, it’s important to understand the long-term commitment and risks involved.
Borrow thoughtfully, plan for the full term, and make sure the loan fits comfortably within your overall financial picture.