how a home equity loan works
essentially a home equity loan is akin to a mortgage hence the name second mortgage the equity in the home serves as collateral for the lender the amount that a homeowner is allowed to borrow will be based partially on a combined loan to value cltv ratio of 80 to 90 of the home s appraised value of course the amount of the loan and the rate of interest charged also depend on the borrower s credit score and payment history mortgage lending discrimination is illegal if you think that you ve been discriminated against based on race religion sex marital status use of public assistance national origin disability or age there are steps that you can take one such step is to file a report with the consumer financial protection bureau or the u s department of housing and urban development traditional home equity loans have a set repayment term just like conventional mortgages the borrower makes regular fixed payments covering both principal and interest as with any mortgage if the loan is not paid off the home could be sold to satisfy the remaining debt a home equity loan can be a good way to convert the equity you ve built up in your home into cash especially if you invest that cash in home renovations that increase the value of your home however always remember that you re putting your home on the line if real estate values decrease you could end up owing more than your home is worth 