Homeowner equity loans are simply put, a loan against your home. Another term that might be used for a home equity loan could be a mortgage or second mortgage.
 

What a home equity loan does is borrow the equity of what your house is worth. If your home has already been paid off, then it would be considered a mortgage. If you were still making payments on your home then it would be considered a second mortgage. A home equity loan is a loan that you take out on your house adding to your mortgage.

This lets you get into your equity and get cash without having to refinance your first mortgage. A lot of people think that the only way to get cash would be to sell their homes. In reality you can actually take money out of the equity, and free it all up without actually having to leave your home.

Value

The difference in the amount that you owe on your home mortgage and the value that your home is worth is equity. A lot of finance companies let you borrow money based upon what is available on your home, with good deals.

Think of it like this, if you sold your home for a certain amount and it paid off your mortgage. Anything after the mortgage is paid off would be cash in your own pockets. Homeowner equity loans allow you to get that money without ever having to sell that home. The amount you can borrow for a home equity loan is based on a percentage.

The percentage your home is worth or appraised at minus the outstanding balance on the mortgage itself is equity. It is usually quite simple to get approved as long as you are a homeowner. Some companies may even let you borrow up to 125% of the current amount your home is worth at current market prices, minus the amount that you actually owe.

Uses

Homeowner equity loans are usually a one time loan. That is paid out one time in a lump sum that can be used for anything it will usually have a set fixed interest rate. The amount of a home equity loan will have many deciding factors. One being your personal circumstances, another being the amount you want to borrow and what kind of repayment period you would like in paying the loan itself back.

A few good reasons for a loan of this nature include wedding plans, medical expenses, college or private school, a vacation, buying a vehicle, consolidating debts and home improvements.

Credit Rating

Something to think about is if you have a poor credit rating you can still be offered a home equity loan easier than other types of loans. The reason for this being, the lender has security in the situation. If there are failed payments or defaults he can sell your home. Having good credit usually means you will get a better interest rate on the loan itself, but you need to know that your home is at risk when getting homeowner equity loans.