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Home Equity Loans

Home equity loans allow the borrower to pull an amount of equity from their home. The Colorado home equity loan program offers the best cash out rates and home equity loans in the state. These loans may come in handy for a number of things including paying off medical bills or credit card debt. The loan increases the lien on the home of the borrower and reduces the equity levels they presently possess.

Means of Unlocking Home Equity

The two most common ways of accessing equity built up in the home would be to take on a home equity loan or a home equity line of credit. A Home Equity Line of Credit (HELOC), works like a mix between a checking account and credit card. The money borrowed has an approved limit. In the same manner, like a checking account, the borrower would withdraw the money according to the need using a debit card or special check. Fixed rate home equity loans, on the other hand, are straightforward. The lender gives a lump sum to the borrower that is to be repaid over time with one set interest rate. The periodic payments and rate remain static over the course of the loan. The third alternative would be the cash out refinance where the borrower refinances the existing mortgage into a loan for more than they owe and the difference would be retained.

The standards for borrowing against home equity depend on the lender though they are typical. For one, the equity present in the home has to be at least 20% of its value upon appraisal. The debt to income ratio should be 43% at the most. Attention is also paid to the credit score which needs to be a minimum of 620 and the history of the borrower when it comes to paying bills on time.