Equity Loan Rates
If you need cash for anything from a new car to medical
bills to a home remodeling project, it may be easier than you think. Your
home can be a source of a home equity loan that can get you the money you need
right away. With a little information, you will know what you need to make
sure that you get the best home equity loan rates and terms available.
is important to start out knowing the difference between a fixed rate mortgage
and an adjustable rate mortgage, so that you know which one to apply for when
comparing home equity loan rates.
There are some basic characteristics that
define a fixed rate mortgage. In general, it is easier to understand in
comparison to the adjustable rate mortgages. It offers more security for
buyers, and so is often used by people buying their first home. It is a
great fit for people who like to know what their monthly budget is going to look
like and plan to keep their house for a longer period of time. They generally
have higher home equity loan rates of interest than adjustable rate mortgages
as the perceived risk by lenders is higher, and they usually have higher monthly
payments. They tend to have less flexibility than adjustable rate mortgages.
rate mortgages, on the other hand, are the opposite. The rate varies depending
on one or more indexes. These may be treasury notes and bills, the Federal
Housing Finance Boards National Average mortgage rate, average interest rate paid
on jumbo certificates for deposit, and cost of funds for the specific lender.
The rates go up and down, so the lower the rate is that month the lower the payment.
This may mean that you qualify easier for the loan or that you can get a larger
mortgage. It is a good option for people who only plan on staying in the
house for a couple of years.
There are some ways to help you get the best possible
home equity loan rates and therefore the cheapest mortgage or home equity loan.
This includes: paying every bill as soon as you get it so that lenders know that
you will make your payments on time month after month, making you a lower risk;
making a larger down payment so that lenders perceive you as less of a risk of
defaulting (plus then you will need to borrow less); pay off as much debt as you
can so that lenders can see that you can afford all of your monthly payments;
buy a house you can afford, which generally means not more than 30% of your income
going to the payment; and shopping around to get quotes form multiple lenders.
In basic terms, the less of a risk that lenders perceive you to be, the lower
the rate is that you will be able to qualify for. In some cases, you may
find it prudent to wait a year or two to get other debts cleared so that you will
qualify for a better rate. You can also look into other ways to improve
your credit rating with smaller loans before applying for a large one.