High debt loads but lots of equity. Can I get money for home improvement?

Question: Eight years ago I refinanced my home loan with a home equity loan because the bank was offering a cheaper interest rate than what I had and no closing costs.  I want to sell my home to get out of debt.  I need to fix some things before I sell it. How do I get a small home improvement loan without refinancing my loan?  I have lots of debt but I also have a lot of equity in my home.

Answer: Provided your home equity loan is the only loan against your home--that is, it is in the first-lien position--you should be able to obtain a second mortgage, or better, a home equity line of credit. Equity lines of credit are usually available with rates just slightly above the prime rate (3.25 percent today) and can provide maximum flexibility for your home improvement projects.

That said, if your income won't support much more debt, you will still have trouble borrowing new money, no matter the loan vehicle you choose. With lenders stung by losses in the downturn, underwriting standards have stiffened considerably. In general, you won't be able to leverage your home beyond about 80 percent of its present value, and your debt load often cannot be greater than 36 percent to about 41 percent of your monthly gross income.

Since home equity products are usually "portfolio" loans (lenders keep them on their books), there can be considerable variability in the rates and terms you might be offered, so you'll want to shop around your market to see what, if anything, can be made available to you.

Ask the expert
Keith Gumbinger
Keith Gumbinger
Mortgage Expert
Vice President, HSH.com
About Keith: Mortgage market observer and analyst with 35 years experience... (more)
Submitting your question...

Question received! Check back later to see if your
question gets published.

Q: Can my friends and I buy a house together?
JUL 18, 2021
A:

The answer is "yes," you can certainly all buy a house together.

Read More
Q: What is the difference between "rate" and "APR"?
APR 26, 2021
A:

APR is perhaps the most misunderstood part of mortgage finance. "Rate", or more properly "contract interest rate" is the actual rate of interest you are being charged...

Read More
Q: How do I find out who owns my mortgage?
MAR 15, 2021
A:

The owner of the loan is most often the "investor" -- the entity who put up the actual funds to make your mortgage happen.

Read More
Add to Homescreen?
X
X
Install this web app on your phone :tap and then Add to homescreen