A Home Equity Loan is issued as a second mortgage against your primary residence. It is referred to as a second mortgage because most borrowers have a “First Mortgage” that was used for the purchase of the primary residence and that loan stays in place. 

The term or the time frame on which payments are calculated for a Second Mortgage is typically shorter than the 30 years available on a first mortgage with a 10 year term being about average.

While Home Equity loans can be used for any number of purposes, they typically would be used for significant home renovation or remodel expenses that would potentially increase the value of the home or maintain its quality. Members often use the available funds for additions, kitchen or bath remodel upgrades, decks, house painting or window replacement. 

It’s important to keep in mind that many of the items listed will not increase the actual value of the property or if they do, only as a percentage of the amount invested. For example, a significant kitchen remodel that costs $30,000 may only increase the value of the home by $10,000. As such Home Equity loans used for home renovation should be considered as a long term investment in the livability of the home rather than as an investment desiring a dollar return.