Home Equity Loans are loans made by banks to individual homeowners. They are secured by the equity of a home. It is a popular way for homeowners to borrow money because the percentage rates are typically much lower than a credit card or a line of credit. The laws that govern home equity loans vary from state to state. Some states restrict the amount that can be borrowed to 80% of the equity. This ensures that there are adequate funds to pay off the loan in the case of a default and the property has to be sold. Homeowners can determine the potential amount they can borrow by taking 80% of the appraised value of the home and subtracting the amount that is owed on the mortgage. Some banks allow for the loan to be paid back as interest only for a period of time or until the home is sold.
