Tapping Into Your Home Equity with Quicken Loans

Owning a home is one of the biggest financial accomplishments for many people. Not only does it provide you with a place to call your own, but it can also help you build financial security through home equity.

As you pay down your mortgage loan and as your home increases in value you gain equity in your property. This equity essentially represents the current value of your ownership stake in the home. With enough equity built up, you have the option to tap into it through a home equity loan or line of credit.

In this article, we’ll explain everything you need to know about using a Quicken Loans home equity loan or line of credit. We’ll cover

• What home equity is and how it works
• The benefits and risks of tapping into your equity
• How to qualify for a Quicken Loans home equity loan
• Interest rates and terms for equity loans
• Alternatives like HELOCs and cash-out refinances

What Is Home Equity and How Does It Work?

Home equity is calculated by taking the current market value of your home and subtracting any mortgage debt still owed on it.

For example let’s say you purchased a home for $200,000 and took out a $160,000 mortgage loan. After 5 years you’ve paid down your loan balance to $140,000. Meanwhile, comparable homes in your neighborhood are now selling for around $250,000.

In this scenario, your home’s current value is $250,000 and your remaining mortgage debt is $140,000. So your home equity would be $250,000 – $140,000 = $110,000.

The more principal you pay off on your mortgage, and the more your home appreciates in value, the more equity you’ll accumulate.

You build equity passively over time as you make mortgage payments. But there are also a few ways to build home equity faster:

• Making extra principal payments
• Completing renovations that increase property value
• Making a large down payment when you originally buy the home

Once you have a meaningful amount of equity, you can access it through home equity loans and lines of credit.

The Benefits and Risks of Tapping Home Equity

Using home equity can be an affordable way to access funds, but it does come with some risks.

Potential benefits include:

• Lower interest rates – Home equity loans typically have lower rates than other financing options like personal loans or credit cards.

• Use funds for any purpose – Money taken out against home equity can generally be used for any purpose, whether it’s consolidating high-interest debt, funding home improvements, or covering college tuition.

• Tax deductions – You may be able to deduct interest paid on home equity loans on your taxes.

However, risks include:

• Your home is collateral – If you default on home equity loan payments, the lender can foreclose and you could lose your home.

• Closing costs – You’ll likely need to pay closing costs and fees to take out a home equity loan.

• Lower home value – If your home value decreases, your equity could decline and reduce how much you can borrow against your home later.

Carefully weighing these pros and cons will help you decide if a home equity loan or line of credit makes sense for your financial situation.

Home Equity Loan Requirements from Quicken Loans

While home equity loan qualification requirements can vary by lender, here are some general guidelines on what Quicken Loans looks for:

• Credit Score – A credit score of at least 620 is recommended. The higher your score, the better.

• Debt-to-Income (DTI) Ratio – Your total monthly debt payments, including the new home equity loan payment, generally shouldn’t exceed 45% of your gross monthly income.

• Loan-to-Value (LTV) Ratio – The size of the home equity loan usually can’t exceed 80-85% of your available home equity.

• Home Equity – You’ll need to have enough equity built up to tap into while meeting LTV requirements. At least 15-20% equity is common.

Quicken Loans also requires standard documentation like pay stubs, tax returns, and a home appraisal. Meeting these requirements gives you the best shot at approval.

Interest Rates on Quicken Loans Home Equity Loans

The interest rate you qualify for on a home equity loan depends on factors like your credit score, loan amount, and equity.

In general, home equity loan rates tend to be lower than alternatives like personal loans or credit cards. But they are usually a little higher than first-mortgage rates.

As of March 2023, average home equity loan rates are around 7% – 10% for both fixed and variable rate loans.

Quicken Loans offers both fixed and adjustable rate home equity loans. Your loan officer can provide personalized rate quotes based on your financial profile and qualifications.

Loan Terms and Payments

Quicken Loans offers home equity loan terms of 10, 15, 20, and 30 years. Shorter terms have higher monthly payments but you pay less interest over the life of the loan.

Once approved, you’ll receive the loan amount you borrow in a lump-sum payment. You’ll then make fixed monthly installment payments over the agreed upon loan term to repay the principal and interest.

Home equity loans act as a second lien on your property. Your payments are in addition to your existing monthly mortgage payment.

Alternatives to Home Equity Loans

Beyond standard home equity loans, there are a couple other options for accessing your home’s equity:

Home Equity Line of Credit (HELOC) – This functions more like a revolving credit line. You have an approved limit to draw funds from as needed, and you only pay interest on what you use.

Cash-Out Refinance – You refinance your mortgage for more than what you currently owe, taking the difference in cash. This combines everything into one new mortgage.

Quicken Loans offers both HELOCs and cash-out refinance mortgages as well.

Tapping Home Equity with Quicken Loans

As you can see, a home equity loan from Quicken Loans lets you unlock funds from the equity you’ve built up in your property. This can provide an affordable way to finance major expenses or consolidate high-interest debts.

However, it’s critical to carefully consider both the benefits and risks involved before moving forward. And be sure to confirm you meet all loan qualification requirements to get approved.

If you decide a home equity loan is right for you, Quicken Loans streamlines the entire process. Their team of mortgage experts will guide you through every step, ensuring you understand all the details before providing access to your home’s hard-earned equity.