I bought a house. When can I apply for a home equity loan?
Posted By Terrie on May 7, 2010
First things first: What is a home equity loan? This is the amount of money you can borrow from the equity of your home. The larger the amount, the bigger the sum is.
In essence the amount you can borrow can be calculated by subtracting the still owed part of your mortgage from the value of your home.
Needless to say you first need to build up this home equity before you can borrow it. In most cases the value of a house increases greatly with time.
When can you go ahead and release your home equity? There are no fixed time frames for this. Basically the more money you pay back and the faster you do that, the sooner you can borrow and the bigger the borrowed amount of money can be.
It is absolutely essential to keep in mind that the home equity loan is not just a big sum of cash that you can take and spend however you please. This is borrowed money and you would have to pay it back. Typically you will be given 5 to 25 years to repay. Therefore the less you borrow, the quicker you will be able to get rid of this debt.
After you buy your house it is recommended to wait a couple of years before applying for a home equity loan. During this time your home will increase in value and part of it will be paid off.
An important fact to consider is that if your house market value is more than what you originally paid for it you might be able to get a home equity loan at the same time when you buy your home. Get your house appraised, so you can have a good solid information to base on before you go ahead and borrow.
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