The St. Mary's Blog

Home equity loans are a great way to pay for a renovation, consolidate your debt, or even fund your child’s education. But before you apply, it’s important to fully understand equity loans and decide whether they’re right for you. Serving members across Massachusetts, St. Mary’s Credit Union always advises homeowners to do their research before making a financial commitment. Here, we take a closer look at this financing option and home equity loan rates in Massachusetts.

How Home Equity Loans Work

Home equity loans allow you to tap into the equity you’ve gained in your home. Equity is the unhindered interest you have in your home, or whatever value of your home is purely yours and not covered by a mortgage or lien. Home equity loans are a way to turn that value into ready money for a range of purposes, with funds distributed in a single sum of cash that can be paid back over time. These loans are even tax deductible if the money is used for renovations or home improvement.

When you take out a home equity loan, your lender will review your application and check your credit. They’ll then tell you how much you can borrow, your interest rate, monthly payments, and loan term. All these will depend on your lender, your financial situation, and how much equity you have.

Evaluate Your Home’s Equity

To know whether a home equity loan is right for you, start by calculating your home’s loan-to-value (LTV), a metric used by financial institutions to analyze borrowers before approving a loan. To determine your LTV, divide the amount you owe on mortgages and liens on your home by the value of your home. For instance, if you owe $100,000 on a $200,000 home, you have a 50% LTV. Compare your LTV to your lender’s LTV to see if you qualify for a loan.

Next, find out how much you can borrow by multiplying your equity by the lender’s maximum LTV. Then, subtract your mortgage balance. The resulting number will be the maximum amount you can borrow, giving you a clearer picture of exactly what you could do with a home equity loan and if the process is truly worth it for you.

What to Watch Out For

Before you apply for a home equity loan, however, keep in mind that they’re not ideal for risky financial endeavors. You may not have the opportunity to repay the loan and might put your home at risk since your lender can legally repossess your home if you fail to pay the debt. Home equity loans are best for safe investments with plenty of time for repayment, so we generally recommend avoiding using home equity loans in the following situations:

• Starting a new business
• Paying for other large loans
• Close to retirement

Take Advantage of Our Rates

Home equity loan rates in Massachusetts can be difficult to understand, but that’s where St. Mary’s Credit Union comes in. Offering competitive rates, our friendly and knowledgeable team can help you determine whether a home equity loan or another type of personal loan is right for you. With quick decision-making and local processing, our members can benefit from their loans quickly and without hassle. To find out more about our home equity loan rates, contact us today.