Equity Loan Definition

An equity loan is a real estate mortgage resulting in cash being given to the borrower. For example, if you own your home outright you could obtain an equity loan for up to the market value of the home. An equity loan is, in essence, a mortgage on some or all of the property. Some equity loans are flexible in terms, such that the borrower can e.g. use a credit card to increase the amount of the loan on the property. Although flexible, these types of arrangements are best avoided as they place the home at risk in the event of financial distress.