What is a home equity loan? (part 1)

What is a home equity loan?
A home equity loan is a form of credit for
 which your home is pledged as collateral. Generally, home equity loans offer a fixed interest rate and a fixed monthly payment. A standard home equity loan (also called a second mortgage) is paid off over an extended period of time.

You can estimate your home equity by adding the balance of all the debts secured by your home, then subtracting the total from your home's value.

What are the primary advantages of a home equity loan?
The two major advantages of borrowing with a home equity loan are lower interest rates and potential tax savings:

 The interest rate you will pay on the average home equity loan is generally lower than the interest rate you will pay on the average credit card or any other type of non-secured debt.  For home equity loans, you can generally deduct the interest you pay. The interest you pay on credit cards and other types of personal loans is generally not tax-deductible. Consult your tax advisor about the deductibility of interest.

How can I use my home equity loan?
You can use a home equity loan for almost anything. Common uses include debt consolidation (paying off high-interest credit card debt), home improvements, paying for education expenses, college tuition and buying luxury items.

Can I pay off balances from other accounts?
Yes. You may use the proceeds of your new home equity loan or line of credit to pay off balances from other accounts, or we can process those payoffs on your behalf.

What is a debt consolidation loan?
A debt consolidation loan is a type of home equity loan that allows you to combine several debts into one loan. By making one lower monthly payment, you can more effectively manage your debt. The key to successfully reducing your debt is to discipline yourself from new spending. If you're consolidating credit card bills, don't use the credit cards after you get a debt consolidation loan, even if you've cleared your balances. You could be tempted to overspend, which would eliminate the benefits of consolidating your debt.

Do I have to live in the residence I'm using as collateral?
Yes, Chase Credit Policy requires the collateral property to be a primary residence.

How much can I borrow?
Depending on loan type, property type and other criteria, you may be able to borrow up to $500,000. The relationship between your loan amount and your home's value is called the "loan-to-value" ratio, or LTV. As LTVs increase, the cost of the loan in question usually increases as well.

How do I know if I qualify?
You must complete an application for us to determine if you qualify. It takes only 10 minutes to apply online and you’ll get a response in about 90 seconds. APPLY TODAY

Once you have applied, we will evaluate several criteria, which may include:

 Credit history  Employment and income  Amount of the loan or line requested  A review of the assessed value of the property and the amount of any existing mortgage debt on that property

Can I be self-employed and qualify for a home equity loan?
Yes. Self-employed applicants can qualify provided they meet the
approval criteria. Depending on your request, income documentation may be required.

Is there another way to borrow against my home's equity?
Yes. Cash-out refinancing is not a home equity loan but it does let you borrow against your home's equity. In cash-out refinancing, you refinance the existing debts secured by your home (i.e. your mortgage) with a new loan, but in addition, you also borrow new funds over and above the total of those existing debts. The difference between your new loan and the total of the old debts is a loan against your home's equity.

Can I refinance my existing loan account and pocket some additional cash?
Yes. A home equity loan or line of credit is a good way to refinance your existing mortgage loan, take some additional cash and make one easy monthly payment. Chase does not set aside "escrows" for property taxes or property insurance. If your current mortgage loan has an escrow feature and you refinance it with a home equity loan or line of credit, you will become responsible for the property taxes and insurance premiums.

How can I compare different loans and lines?
The APR or annual percentage rate, is an important factor to consider when shopping for a home equity loan because in most cases, it takes into account both interest and fees. The APR, which is expressed as a yearly rate, factors in the loan interest rate and all fees paid to obtain the loan. Generally, the lower the APR, the lower the cost of your loan. When comparing APRs between loans, make sure the terms and conditions of the loans are the same.

When comparing a home equity loan to a home equity line of credit, you should be aware that the APR for the home equity line of credit only takes into account the interest rate on the line of credit, and does not include any additional fees.

How much will my payment be and when is it due?
When you schedule your closing, you will have the opportunity to select the date that your monthly payments will be due. Factors including loan amount, interest rate and term are used to determine the payment amount.

As a convenience, monthly payments may be automatically deducted from your Chase checking account. Ask your Loan Officer for automatic payments and you may benefit from an interest rate reduction.
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