Understanding home equity
Secured loan equity is an important concept to understand when applying for secured lending. For homeowners that have a mortgage running on their home, it would be important to have enough equity on their property that can be secured for the loan. Home equity is the value of the property that would be left once the pending value of the mortgage is removed. It is based on this value that the loan company would decide how much loan amount you would be eligible for or how much loan to value can you get on your secured loan.
For example, if your home has a value of 100,000 and the amount that you still owe to the mortgage lender on your home is 50,000, then your home equity would be 100,000 - 50,000 = 50,000. It would be based on this amount that the loan company would offer you a secured loan.
Do you have enough home equity?
In order to get a secured loan, you would need to have enough secured loan home equity on your property. The loan companies would take into consideration the remaining balance on your property after the mortgage amount that is owed. To know if you have enough home equity, all you would have to do is to calculate how much equity you still have once you pay off the mortgage in full. This is the amount based on which the loan to value percentage would be calculated by the loan companies.
Although there are quite a lot of other considerations that you would have to take into account and which the loan companies would consider when they are taking a decision on their applications, the equity on the property is one of the first things that would be checked by the loan company. If you require a loan of 25,000, you must have the home equity of at least 25,000 on your property.