Tapping into your home equity for a home improvement loan, education expenses or medical bills can be one of the best ways to get the extra funds you need. Depending on your needs, you can choose between a fixed-rate home equity loan and a variable-rate home equity line of credit. But, before you can really decide on the best choice, you need a home value estimate to see how much equity you have in your home.
The quickest way to estimate home value is to do some simple math. Take your home's market value and subtract the amount you still owe on your mortgage.
For example, let's say your home is worth $140,000 and you owe $110,000. In this case, you have $30,000 in equity. You can also use our home improvement loan calculator for these calculations.
However, this isn't the most exact way to calculate equity. For one thing, you're guessing your home's market value, which can fluctuate substantially. When the economy is strong, your home's value will likely climb. When the housing market falters, though, it's difficult to know how that will affect your home. So, to get a more accurate figure, get an official assessment.
When you're ready to take out a home equity loan or line of credit, an assessment of your home's worth will be done. This assessment will examine your home, property and surrounding area to determine the current market value, and may or may not include an appraisal done by an independent, Citizens Bank appointed home appraiser. There may be fees involved with getting your home appraised with some lenders; however, Citizens Bank does not charge extra for the home appraisal process.
Once you've determined that you have $40,000 in equity, you may or may not be able to borrow all of that. The loan to value (LTV) ratio dictates how much a lender is willing to lend. Many banks and financial institutions use an LTV of 80%, which means they won't let you carry debt that is more than 80% of your home's value. This debt includes your current mortgage as well as the new loan or line of credit.
For example, if your home is worth $150,000 and your bank uses an 80% LTV, you could only have $120,000 in debt. So, in the end, you would be eligible to apply for a $10,000 home equity loan or line of credit.
Now that you know how much your home is worth, you can apply for a home equity line of credit online. For a home equity loan you can complete a quick form online and a Citizens Bank Home Loan Originator will contact you by the end of the next business day to complete your application