Can I/how do I get a home equity loan on a low value property?

December 24, 2017 9:07 PM

I talked to a lending company and went through the process for getting a home equity loan up 'til the appraisal (didn't do the appraisal yet). It seems like everything else is in order, but I have no idea how the house is going to appraise - possibly under $50,000. Whatever the value is, we'd like to get a loan if we can...but the next steps are crucial. What should I know about choosing a lending company and any other considerations before paying $500 for an appraisal that may or may not result in a loan? Is there a standard value below which it will be tough to get a loan?
posted by lgyre to Work & Money (5 answers total)

Is there an outstanding mortgage on the property or do you have the entire $50,000 as equity? Most lenders would want to see at least 20% of equity unemcumbered by loans but with such a low value property they may want closer to 50% (because $10,000 would very quickly be eaten up in legal fees etc if they had to foreclose). It also depends very heavily on your local market and whether the property would sell quickly if needed.
posted by saucysault at 10:03 PM on December 24, 2017

Response by poster: Oh, yeah, there's no mortgage.
posted by lgyre at 10:44 PM on December 24, 2017

Response by poster: I guess some more specific questions that I'm wondering about are if we should shop around for a lender, and if so what to look for? And if we get the appraisal from the vendors that one lender requires, would we likely have to get a second appraisal if we want to check with another bank? Also, anything else we should be considering at this point.
posted by lgyre at 10:47 PM on December 24, 2017

The times I have gotten a home equity loan, the lender chose the appraiser through a random choice system the banks use since the real estate inspired recession. This keeps lenders and owners from gaming the system with less than honest appraisals. So it might be a waste of money to get your own appraisal, check with your lender.
As best I understand, banks don't like the loan to value ratio to be any greater than 80%, but this was with a primary mortgage and a home equity loan combined, so your situation may be different.
posted by rudd135 at 4:22 AM on December 25, 2017

Go to a credit union. Establish a relationship with a credit union if you haven't already. They make good loans if you are in good shape credit wise, or even if you are in medium shape.
posted by Oyéah at 8:43 PM on December 25, 2017