- Home equity loan payments are a function of the size of the loan, the interest rate on the loan, and the loan repayment schedule. A home equity loan payment is the amount of regular payment (usually monthly) required to amortize the loan to zero at the end of the equity loan's term.
- Home equity loans differ from home equity lines of credit in that they are usually a one-time loan for a fixed amount. A home equity line can fluctuate as the borrower uses and repays the line. The fixed amount of the home equity loan usually comes with a fixed repayment schedule as well as a fixed interest rate.
- A true home equity loan cannot exceed the value of the equity that exists in the home, although some lenders have offered home equity loans for greater than 100% of the home's equity, the amount above 100% is actually an unsecured loan. Many lenders further restrict home equity loans to a certain percentage of the home's equity.
- A home equity loan uses your home for collateral. Failure to repay the loan can result in the borrower losing her house even if the amount of the equity loan is far lower than the value of the home. (The borrower would be entitled to the rest of the money upon satisfaction of the collateral claim.) For this reason, it is not advisable to use home equity loans without careful consideration.
- A home equity loan payment provides the borrower with a way to get a large sum of money up front while paying that amount back over time from incoming cash flow or other means. In addition, many home equity loan payments can have their interest deducted on the borrower's taxes, subject to certain restrictions and limits.
