Home equity loans

A secured home equity loan can help you through any home improvement project. Get connected with reputed and trusted money lenders to apply for a home equity loan. Kukun has partnered with the leading names in the market, such as SoFi, to bring you the best home improvement loan options.

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home equity loan
What is a home equity loan?

Home equity loans are types of loans that arrive in the form of a fixed loan amount . It is secured by residential property and is used to access the existing equity in your home. The term or length of the loan can be between 10 years and 30 years with the most common being 10 year and 15 year terms. The loan amount can vary between $5,000 and $5,00,000. You can use a home equity loan for adding square footage to your home, renovating your home without moving any walls, or expanding your home by moving walls.

Home equity loans are allotted in one lump sum. Therefore, they are perfect if you are sure about the exact amount you need. Moreover, the interest component of home loans for home improvements is tax deductible. The cap on interest is $750,000 (mortgage + home equity loan). Additionally, home equity loans offer competitive interest rates -- much lower than personal loans, credit cards, and cash-out refinances. Therefore, they are a great option when you want to save on paying huge monthly interests.

Using your home equity is the wisest best when you know you are going for bigger home improvements and are sure that these upgrades will substantially increase the value of your home.

What is the eligibility criteria?

A lender generally looks at a few aspects of a borrower before sanctioning a home equity loan::

Prerequisites for sanctioning a home equity loan

Age

18 or above

Credit History

Record of timely repayments in the past

Citizenship

Legal US resident

Employment History

A long-standing job with a steady source of income

Bank Account

Verifiable account with a reputed bank

Monthly Debts

A low debt-to-income ratio of 43%, or possibly up to 50%

Credit Score

620 or higher (300-575:Poor, 580-669:fair, 670-739:good,740-799:very good, 800-850: exceptional)

Credit History

Record of timely repayments in the past

Employment History

A long-standing job with a steady source of income

Monthly Debts

A low debt-to-income ratio of 43%, or possibly up to 50%

Terms, conditions, and state restrictions apply. See SoFi.com/eligibility for details. SoFi loans are originated by SoFi Lending Corp., Licensed by the Departament of Business Oversight under the California Financing Law License. *https://www.sofi.com/legal#welcome-bonus

How home equity loan works?

The loan amount (minus any fees) is paid out to the approved borrower at time of closing, and interest charges begin accruing on the full loan amount. It typically is provided as a 2nd mortgage as it is obtained in addition to an existing mortgage.

when the borrower does not want to refinance or payoff an existing mortgage.Most Home Equity Loans allow the borrower to obtain a loan amount up to 80% of the property’s value less any outstanding mortgage balance. For example, a qualified borrower with a qualifying property appraised at $400,000 with an existing mortgage of $270,000 may obtain a Home Equity Loan of $50,000 ($400,000 x 80% - $270,000 = $50,000). Some creditors may allow qualified borrowers to obtain up to 90% of the homes appraised value.

Key features of home equity loans:

Home Equity Loan Types

Typically, this financing option is a fixed rate loan, with interest rates constant over the life of the loan. But variable rate loans are also available from some creditors. The interest rates being charged on home equity loans are usually a little higher than conventional 1st mortgages, but less than unsecured loans.

Fixed Rate

On a “fixed rate” Home Equity Loan the loan amount will be amortized over the length of the loan to establish a fixed monthly principal and interest payment so the loan will be completely paid off at the end of the term. For example, on loan of $50,000 with a 15-year term at an interest rate of 6% the required monthly principal and interest payment will be $421.93.

Variable Rate

With “variable rate” Home Equity Loans the interest rate is tied to short-term interests, such as the Prime Rate, plus a fixed margin of 1% or 2%, so that the rate being charged will change as interest rates change. This means the required monthly principal and interest payment will change each month as interest rates change and the loan is re-amortized each month over the remaining term of the loan so this home equity loan is fully paid off at the end of the term.
Home equity loan

What are the pros and cons of a home equity loan?

arrow icon The pros
  • Loan proceeds paid out in lump sum
  • Fixed interest rate and payments.
  • Monthly principal and interest payments fully payoff loan by end of draw - no balloon payment.
  • Loan terms up to 30 years, and may be paid off early without fees or penalties
  • Low upfront/closing costs and fees..
  • Rates lower than other forms of credit
  • Interest maybe tax deductible, depending on your purpose (seek advice of tax professional).
  • Allows borrower to keep existing 1st mortgage.
arrow iconThe cons
  • Requires property to have reasonable amount of equity – existing loans plus Home Equity Loan typically limited to 80% of existing value of property.
  • Borrower needs good credit and ability to repay loan to qualify.
  • Requires full principal and interest payments monthly.
  • Fixed interest rate may be higher than conventional 1st mortgage rates.
  • Requires full home equity loan application, borrower documentation and appraisal, and may take 30-45 days to obtain funds.
  • Available through most banks and credit unions

Still Have Questions?

 
 

Compare loans

Are you ready to take on that home remodelling project? Apply for a home improvement loan here.
Kukun partnered with few lenders to make the process hassle free.

 
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Interest Rate

Adjustable - will
change periodically

Fixed – will not change

Fixed – will not change


Monthly Payments

Payment changes when interest
rates change. Monthly interest-only
payments during draw

Fixed for life of loan Full
principal and interest
payments monthly

Fixed for life of loan. Full
principal and interest payments
monthly


Term (length
of loan)

Available terms between 10
years and 30 years

Available terms between
2 years and 7 years

Available terms between 10
years and 30 years


Min & Max
Loan Amount

$5,000 to $500,000

$2,500 to $100,000

$5,000 to $500,000


Borrower
Qualifications

Requires good credit, good
income and low debt-to-income
ratios

Requires excellent
credit, good income and
low debt-to-income
ratios

Requires good credit, good
income, and low debt-to-income
ratios


Closing Costs
and Fees

Lower cost and fees than
conventional and FHA
loans. Depending on LTV, may only
require limited appraisal.
May have balloon payments and
annual maintenance fees

No fees or very low fees.
No appraisal needed. May
have early termination
fee in first 12 months

Lower cost and fees than
conventional and FHA loans.
Depending on LTV, may
only require limited appraisal.
No prepayment fees or balloon
payments


Application,
Timeframe
and Availability

Limited application of 30 days or less.
Available through most banks
and credit unions

Short online application of
3–5 days. Limited
sources

Limited application of 30
days or less. Available
through most banks and credit unions

Interested in starting your remodeling project?