Equity Loan

• Equity within your home may enable you obtain a mortgage equity loan. An appraisal could inform you of your home's present market value. Using an appraiser's valuation of your home, you would subtract any mortgage liens that are secured against the subject property, to determine the equity within your home. For instance, if your home appraised for $185,000 and your mortgage balance equals $145,000, you would have $40,000 in home equity.
  
  

Cash Out

• Cash out from a home equity loan may be used for a variety purposes. Loan proceeds could pay for items, such as tuition costs, home improvements or to consolidate some of your consumer debts. Funds are typically disbursed a few days after you have met with a closing attorney to sign and date the applicable documents for a new mortgage loan. Before borrowing against the equity in your home, you should shop local banks and online mortgage lenders to locate competitive rates and terms (see Resources).
  
  

Qualifications

• Certain income, equity and credit requirements are essential to obtaining an approval for a cash-out mortgage loan. Initially, a loan application and a review of your credit report could enable a lender to determine your eligibility. Generally, an above-average credit score is required to obtain a cash-from-equity loan. A mortgage lender may request proof of your income, bank statements and a home appraisal before issuing a final loan approval.
  
  

Considerations

• Proceeds received from a home equity loan are not taxable, if your cash out is less than $100,000. Similar to a cash advance from a credit card or a personal loan from your bank, taxes are not withheld or payable for these types of transactions. Federal, state and local taxes are based on income and other forms of compensations. However, you may incur a state sales tax for certain items that are purchased with the proceeds from a cash-out loan.