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Shopping Home Equity Loan Rates
By: Jennifer Hershey
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.
About the Author:
Jennifer Hershey has more than twenty years of experience in the Mortgage
Industry as a loan officer. She is the owner of http://www.explainingmortgages.com/,
a mortgage resource site devoted to making mortgage terms and products easy to
understand.
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