July 21, 2024

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Creating Home Magic

Learn How to Get a Great Rate on Your Home Equity Loan

Learn How to Get a Great Rate on Your Home Equity Loan

Have you been considering taking out a home equity loan to finance upcoming purchases or expenditures? With the ease of online home equity loan lending institutions, you can get the money you need now without the hassle, high interest, or red-tape of traditional lenders.

Your home is the most valuable asset that you have, typically making up the biggest chunk of your financial picture. Over the years, you have invested lots of money in your home by making monthly payments on your mortgage. You can use the equity that you have built up in your home to receive a home equity loan with an online lender.

Choose a New Lender

Many homeowners are led to believe that the best practice when it comes to obtaining their home equity loan is to stick with the bank that financed their home in the first place. However, that is not necessarily true. In fact, your bank probably could not compete with the lenders that have established themselves online by offering lower interest rates coupled with more flexible repayment options than you would get with your original loan servicer.

A home equity loan is not a second mortgage, but when you take out your home equity loan, you must remember that the lender is still subject to foreclose on your home should you default on payments. But just like a second mortgage, your home equity loan can help you pay for expenses such as appliances, automobiles, education, travel, home improvement, remodeling, or others. Moreover, you can also use your home equity loan to consolidate bills or pay off higher interest debts that are eating a hole in your financial structure. The choice is yours.

Borrow What You Need Now

You can typically take out a home equity line that is equal to seventy-five percent of the appraised value of your home, minus the amount that you still owe in mortgage payments. For example, if your home appraises for $100,000, and you still owe $50,000 to the original lender on your mortgage, you can qualify for a home equity loan of $25,000. ($100,000 X .75{7fcbeda410c9f02a886f83a59a5af911565ec7141a170d397df667872a958d9e} =$75,000 -$50,000 = $25,000). Home equity loans are very easy to get approval for because the bank has very little risk in loaning you the money; after all, they are holding a lien on your home for security.

Because of the ease of approval, online lenders in the home equity loan market are very competitive. It is not unusual for a borrower with decent credit to obtain a home equity loan with interest that is just a few points above prime, or perhaps as low as .05{7fcbeda410c9f02a886f83a59a5af911565ec7141a170d397df667872a958d9e} above the prime rate (usually the prime rate that is listed by a financial newspaper or agency). This means that shopping online can yield you savings that will be recovered over the life of the home equity loan.

Save With Tax Breaks

Additionally, home equity loans in amounts under $100,000 qualify you, as a taxpayer, to deduct any the interest that you pay on your personal income taxes. This can add up to additional savings for you over the term of your home equity loan.