When thinking about getting a home equity loan, most homeowners contact their current lender and acquire a quote. Even though current lenders may offer a good rate, homeowners will benefit from shopping around. Getting quotes for a home equity loan is easy, and free. The problem is that many people are unwilling to research different lenders.

Purpose of a Home Equity Loan

Different reasons motivate homeowners. Some choose home equity loans as a way to climb from under debt. On the other hand, home equity loans provide enough funds to make home improvements such as building an additional bedroom, bathroom, etc. If you have children, the funds can pay for college or a wedding. Other common reasons for obtaining a home equity loan include using the money as start-up capital for a new business or planning retirement.

Home Equity Basics

The money received for a home equity loan comes from the equity a home has gained. As property values increase, and homeowners reduce the principle on mortgage loans, the home gains equity. Lets say the home is appraised at $150,000, yet the homeowner only owes $80,000 on the mortgage, the equity would be $70,000.

Homeowners are usually not able to access the full equity amount. Mortgage lenders determine a qualifying amount by evaluating the borrower