How Equity Loans Work

The value for financing is typically based on the equity you have in your property. Equity is the difference between your property's current market value and the outstanding balance of your mortgage. Lenders may also consider your credit history, income, and overall financial situation when determining the amount you can borrow.

Interest rates are determined based on several factors, including the amount of equity in your property, your credit score, the loan-to-value ratio, and market conditions. Private lenders offer more flexibility, often focusing on the property’s value and equity rather than relying solely on credit scores, allowing for competitive rates even for borrowers with less-than-perfect credit.

An equity loan, also known as a second mortgage, is a loan you take out using the equity (the value you own) in your property as collateral. This type of loan provides a lump sum that is repaid with fixed monthly payments over a set term, offering a predictable repayment plan.

An equity loan is a mortgage that provides a one-time lump sum with a fixed interest rate and predictable monthly payments. In contrast, a home equity line of credit (HELOC) is applicable only to residential homes (not commercial properties) and  functions like a credit card, allowing you to draw funds as needed up to a maximum limit. HELOCs often have variable interest rates and flexible payment terms.

You can use your property's equity for various purposes, such as debt consolidation, home renovations, funding education, managing unexpected expenses, or even starting or expanding a business. It’s a flexible way to access funds for significant financial needs.

Eligibility for an equity loan typically depends on your property's equity, credit history, income, and debt levels. Private lenders may have more lenient requirements, focusing more on the property’s value and equity, making it easier to qualify even if you don’t meet traditional lending standards.

Yes, it is possible to get an equity mortgage with bad credit, especially through private lenders. While your credit score is considered, private lenders place more emphasis on the equity in your property, allowing borrowers with credit challenges to access financing.

Upfront fees for an equity loan can include appraisal fees, legal fees, and lender fees. These costs vary depending on the lender and the specifics of your loan. At BMC Mortgage & Investments, we are transparent about all fees and work with you to ensure you understand the costs involved.