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Shopping Home Equity Loan Rates (PDF)

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					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.

encina real estate

				
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Description: start signing applications, shop around so you can find the best home equity loan rate out there.