8 equity loan rate tips
Introduction
An equity loan allows an individual to borrow using the equity in the house as collateral. This loan is called an equity loan because its value changes with the change of your home's value. If the value of your home falls the equity loan falls too. An equity loan can be used to pay debts, invest in shares, renovate your home or to buy another property. A home equity loan is secured by the homes mortgage. Equity loan are popular due to their flexibility. There are two types of interest rates associated with equity loans. They are the fixed rates and the variable interest rates. Fixed equity loan rates guarantee your equity loan repayments and you are aware of what to pay for a specific period of time. Fixed equity loan rates are relatively expensive than variable equity loan rate. Variable equity loan rates are linked to the lenders standards meaning that the equity loan rate changes as the lenders standards change. If the rates rise, the variable loan rates rise too and if they go down, the interest rates reduce as well.
Step 1
Pull your credit report
Though equity loans are lent out using your homes equity as collateral, your credit card score will have a lot of influence on the equity loan rate that you are awarded. It is important to check your credit report for any errors that may bring down your credit score and make the necessary corrections before applying for an equity loan. Also remember to clear any outstanding bills.
Step 2
Polish your credit card score
If your credit score is poor or fair, improving it with about 50% could reduce your equity loan rate by more than 500$ annually. However, an individual with fair or poor credit often pays 1 to 5 points more than the current prime rates. Borrowers who have good credit reports can avoid paying appraisal or application fess which is also a saving.
Step 3
Consider taking a home equity line of credit
If you want to apply for a home equity loan, it would be wise for you to consider a home equity line of credit that is if you are no certain of the amount will borrow in the future. In home equity line of credit, the equity loan rate is not fixed but they is determined by the current prime rates.
Step 4
Compare available rates
Approach the different equity loan lenders in your area and enquire about their different equity loan rates. Most loan providers offer discount to loyal clients so you could start with your mortgage loan provider and enquire about any available discounts. Use the equity loan rate you get from your mortgage provider as the comparison point. It would also be advisable to compare the lenders terms and conditions of service before settling on one lender.
Step 5
Understand the additional fees included
There is no lending institution that is going to give you a loan without some extra charges. Most equity loans have the closing cost which is the equity loan rate of closing a successful home equity loan deal. Other fees include application fees, credit reports, title search fees,insurance fees, appraisal fees, documentation fees and notary fees.
Step 6
Pay 20% or more deposit
Paying a good amount of deposit will reduce your equity loan rate since the total sum to be repaid will reduce. Try and make 20% or more deposit. But do not strain yourself, just work with what you have. You could also repay more in the monthly payments this will also reduce your future equity loan rate and also your equity loan repayment term.
Step 7
Make sure that your equity loan rates are calculated regularly. Any principal repayments that you make should reduce your next equity loan rate repayment by some reasonable amount. Do not accept a lender who calculates your equity loan rate after some period of time.
Step 8
Split your loan
Since its not easy to predict the fluctuating interest rates, splitting your equity loan would help to protect you from the upwards fluctuating of the equity loan rate. Split your loan to part variable and part fixed. But consult your lender for the best split situation that suits you.
Tips
Equity loans are open to people who rent housing or council association properties, people who used to own a home but cannot afford to buy one currently and first time home buyers. There some advantages that are associated with equity loans they include;
- Low equity loan rates.
- Easier to qualify for in case of a bad credit.
- Payments may be tax deductible.
- Offers bigger loans.
Make sure you plan your budget before applying for the equity loan. This will help to ensure that the equity loan rate will not overburden you.
