Shopping
Home Equity Loan Rates
If
you have been in your home for a number of years and you have established
some equity,
you may be considering liquidating some of that equity. A great way to
do this would be to go with a Home
Equity Loan.
A
home equity loan allows for you to borrow off of the equity you have established
in your home through appreciation and monthly mortgage payments without
having to touch your first
mortgage.
This
is why a home equity loan can also be known as a second
mortgage. But before you go and start signing applications, shop around
so you can find the best home
equity loan rate out there.
There
are two types of home equity loans on the market that you have to choose
from. The first one is your standard home equity loan with a fixed
rate, which of course, is based on prime.
This loan you receive in a lump sum and begin to make monthly payments
upon it immediately.
The
second type of loan is the home
equity credit line. This one, as its name implies comes in the form
of a line
of credit. The home equity line of credit has a rate that is variable,
which means it will fluctuate with the prime rate. Many of them come with
introductory
rates for the first five or six months.
Once
approved for a home equity line of credit, you will not receive it in
the form of a lump sum. Instead you will receive it in the form of a check
book giving you easy access to draw upon it in the amount you would like
at your convenience. Once you do draw upon it, you will have to begin
paying it back on a monthly basis. Normally in the form of interest
only for the first ten years.
Suppose
you were to receive a home equity line of credit in the amount of $25,000.00.
If you only wanted to borrow $6000.00, than all you would have to do is
write out one of the check’s the lender sent you and deposit it
into your checking account. Your payment would than be based on the $6000.00
you borrowed from your line.
Keep
in mind, home equity credit lines do come with a rate that is variable,
and that rate is based on prime. So, if the prime rate goes up, the rate
on your home equity credit line will go up as well.
On
the other hand, if the prime rate goes down, than the rate on your home
equity credit line will go down.
Mortgage
companies are very competitive, so whichever home equity loan you decide
to go with, it would be in your best interest to shop around so that you
may compare
rates.
After
allowing for a few loan
officers to assess your situation and offer you a rate and product,
base your decision on the rate and product that best fits your needs and
budget.
Another
(similar) explanation of Home Equity Loans
Refinancing
Securing
the Best Mortgage Rate
Shop
Around for the Best Mortgage Interest Rate
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