What is a home equity loan?

A home equity loan is designed specifically for homeowners who want to leverage the equity they have built up in their property. Home equity is the difference between the current market value of the home and the outstanding mortgage balance. By using a home equity loan, homeowners can borrow against this equity, typically at a fixed interest rate, providing them with funds that can be used for various purposes such as renovations, debt consolidation, or major expenses.

This type of loan allows borrowers to access cash while retaining ownership of their property, making it a practical choice for those looking to utilize their existing assets. In contrast, options that refer to loans for purchasing new properties, loans with no interest rate, or loans specifically for first-time homebuyers do not capture the essence of what a home equity loan is, as they serve different purposes and target different borrower needs.