Home Equity Loan Basics



You can cash out all or part of your homes equity with a second mortgage or line of credit. Home equity loan rates are typically a couple of points higher than a regular mortgage. In some cases, you can get a better deal by refinancing your original mortgage and cashing out your equity at that time.

Your home equity loan lender does not have to be your original lender. In fact, you should do comparison shopping on rates and fees to be sure you are getting the best deal.

More Options With Home Equity Loans

Besides how your rates are structured, you have several options when it comes to your home equity loan. Loan periods are flexible, and many have refinancing options. You can opt to only pay interest only for a few years, and then roll it over to a structured payment plan.

With a line of credit, you only borrow what you need. So payments are much like a credit card bill, with a minimum amount due. You could also choose a lump sum payment, ideal for remodels or bill consolidation.

Find The Right Loan For You

With so many choices, it can be a bit intimidating to find the right home equity loan for you. Start by selecting the loan terms that meet your needs, whether thats a large sum payment with a second mortgage or a flexible line of credit.

Next, research lenders based on your ideal loan terms. Ask for loan estimates, but dont give out your credit information just yet. Only give permission for a lender to look at your credit score if you are serious about applying for the loan. Otherwise your credit score will drop needlessly because of multiple credit inquires.

When comparing offers, look at the APR for the total loan cost. But also read about any annual or miscellaneous fees. They can easily add up to a couple of hundred of dollars a year.

Within a day, you can find a competitive lender and be on your way to a low rate equity loan.