A home equity loan is a mortgage that allows homeowners to access the equity in their home to obtain cash. Home equity is the market value of a home in excess of the amount owed on it. People who own the home outright have 100 percent equity and so qualify for home equity loans as long as they have adequate income to afford the monthly payments.
The significance of owning the home outright is that the debt-to-value ratio is zero. Lenders use debt-to-value ratios, or the comparison of the amount of debt to the current value of the home in determining which loans they approve. Usually, getting a loan with LTV values higher than 80 percent is difficult. Outright owners with good credit scores and
adequate income are in good position to secure home equity loans.
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