How To Apply For Home Equity Loan | A Simple Info to Using Your House’s Value

Introduction Think of your house like a big savings box that grows bigger over time. Every time your family pays the home loan (mortgage) each month, and every time house prices in your area go up, more money gets added to this box. We call this extra value home equity.

A home equity loan lets you take some money out of this box right now, instead of waiting until you sell the house. You can use it for important things like repairing the house, paying college fees, or paying hospital bills. Because your house acts like a promise to repay, banks give you this loan at much lower interest than other loans.

In this easy guide, we will explain how you can safely use your house’s value to get money when you really need it.

What Is Home Equity?

Home equity is simply the part of the house that truly belongs to you.

Even if you live in the house, the bank still owns a part of it until your original home loan is fully paid. Equity is whatever is left after you subtract what you still owe the bank.

Easy Formula: Today’s value of your house – Amount still left to pay on home loan = Your Home Equity

Example: Suppose your house is now worth ₹60 lakh, but you still owe the bank ₹25 lakh on the old loan. ₹60 lakh – ₹25 lakh = ₹35 lakh (this is your equity).

Most banks let you borrow 70% to 85% of this equity amount.

Meaning of Home Equity Loan

This is a secured loan. That means you promise the bank: “If I can’t pay back, you can take my house.” Because the bank has this strong promise, they feel safe and charge you very low interest.

You get the full amount in one go (lump sum). Then you pay it back slowly every month in equal parts called EMIs. The interest rate and monthly payment usually stay the same for the whole time – very easy to plan!

How Home Equity Loans Work

Getting this loan is like a careful check-up of your house and your money situation. Here are the simple steps:

Check House Value – Bank sends an expert to see your house size, condition, and what similar houses nearby are selling for.
Check You – Bank looks at your job, monthly income, and how well you paid loans and bills before (your credit score).
Give Offer – If everything looks good, bank sends a letter saying how much money they will give, at what interest, and for how many years.
Check Legal Papers – Bank lawyers carefully read all house ownership papers to make sure everything is clear and correct.
Get the Money – After signing all papers, bank puts the money straight into your bank account.

You usually get 10 to 20 years to pay back, so monthly payments stay small and easy.

Types of Home Equity Borrowing

There are a few different ways to borrow using your house value:

Regular Home Equity Loan – You take all the money at once and pay fixed monthly amounts.
Home Equity Line of Credit (HELOC) – Like a credit card for your house. Bank sets a limit. You borrow only when you need, and pay interest only on what you actually use.
Cash-Out Refinance – You take a new bigger home loan, pay off the old one, and keep the extra cash.
Second Mortgage – A separate extra loan on top of your first home loan. You pay two monthly payments for the same house.

Benefits of Home Equity Loan

Very low interest rates (because house is the safety for bank)
Same fixed payment every month – no surprises
You can borrow large amounts (houses are expensive!)
In India, if you use money to improve the house, you may get tax benefits
Long time (15–20 years) to repay, so monthly amount is small

Drawbacks and Risks

Biggest risk: If you can’t pay, bank can take your house
Some extra costs for house checking, lawyers, and papers
Takes longer time (many weeks) compared to normal personal loans
If house prices fall a lot, you might owe more than house is worth

Who Should Consider a Home Equity Loan?

This loan is good when you have a really important big need:

People who want to repair or make their house better
Parents paying for children’s college or school fees
People with expensive credit card loans who want to move to cheaper loan
Small shop or business owners who need money to grow

Eligibility Criteria in India

Banks usually ask for:

Age between 21 and 65 years
Clear papers proving you own the house
Regular job or steady business income
Good credit score (CIBIL score)
House in a good area that banks trust

Documents Required

You need to show:

PAN card and Aadhaar card
Original house ownership papers (sale deed) and property tax receipts
Report from expert showing current house value
Salary slips or income tax returns (ITR)
Last 6 months bank statements

Interest Rate and APR

APR means the real total cost of the loan (interest + fees). You get lower rates when:

Your house value is high
Your credit score is very good
Your job is stable and pays well

Fees and Charges

Besides interest, you pay small extra amounts:

Processing fee (bank’s work charge)
Valuation fee (expert house checking charge)
Stamp duty and registration charges
Late payment penalty

Home Equity Loan vs. Personal Loan

Feature	Home Equity Loan	Personal Loan
Guarantee	Your house	Nothing
Interest rate	Very low	High
Time to repay	Very long (up to 20 years)	Short (1–5 years)
Amount you can get	Very big	Medium

Smart Uses vs. Mistakes Smart Uses:

Repair or improve your own house (makes house worth more)
Pay for education (helps children earn better in future)
Clear expensive high-interest debts

Mistakes to Avoid:

Don’t use for shopping, vacations, or luxury things
Don’t borrow more than you can easily pay every month
Never pay agents who promise loan in exchange for fees

FAQ (Frequently Asked Questions)

Is it safe? Yes, if you borrow from a real bank and you are sure you can pay every month.
Can I get money quickly? No, it takes a few weeks because bank checks house and papers carefully.
What if I lose my job later? Talk to bank right away. They might give some time or help, but you must keep paying to save your house.