March 10th, 2018 9:00 AM by Jackie A. Graves, President
you need to borrow a large sum of money to make improvements to your home or
help send a child off to college, a home equity loan can be a more
affordable option than using a credit card or personal loan.
home equity loan allows you to borrow against the value that you’ve built up in
your home. Unlike the similar home equity line
of credit (HELOC), which typically comes with an adjustable rate,
the interest rate and payments on a home equity loan are fixed.
how to get the very best rate on a home equity loan.
5 ways to get the best home
equity loan rate:
Make sure your credit looks good
credit score and the amount of debt you’re already carrying play a huge role in
whether you can get the lowest rate possible on a home equity loan.
your credit reports from the three major credit bureaus (Equifax, Experian and
TransUnion) and review them to make certain there are no errors or very old
debts that are hurting your credit.
not to open or close any credit cards, or take out other new debt while you are
seeking a home equity loan. Doing so can lower your credit score, which would
result in a higher interest rate.
less outstanding debt you have, the more likely you can get a lower rate.
can get a free credit report and credit score from myBankrate.
Don’t set your sights too high
get a rough idea of what your house is worth, to determine how much you can
can estimate the value of your home by researching online for recent nearby
the estimated value and subtract what you still owe on the mortgage, which
you’ll find in your monthly mortgage statement. This is how to calculate the
amount of equity you have in your house.
greater your equity, the larger the loan you can get.
in mind: Most lenders will want to limit your home equity loan and any
existing mortgage debt to 80 percent of the value of your home, which is called
the loan-to-value ratio, or LTV.
may find a lender who will let you go beyond 80 percent, but you’ll likely pay
a higher interest rate and face other costs. You’ll get a better home equity
loan rate if you stay below the threshold.
Shop around. Start with people you know
on home equity loan rates offered by your current mortgage holder as well as
any other bank or credit union you currently have an account with.
companies might give you a good deal on your loan, plus the same level of customer
service that you’ve come to expect.
you had a good experience with your current lender, they have every interest in
the world to retain you, so start with them first and then shop their rate
around,” says Brian Koss, executive vice president of Mortgage Network Inc.
Do a wider search and compare quotes
your search for a
great home equity loan rate. Look at what’s being offered by
institutions ranging from the largest national banks on down to local community
banks and credit unions.
the local institutions understand your market better and will have good deals.
want to compare at least three quotes and check to see how the rates size up
against other loan products, such as personal loans.
Consider more than just the rate
lenders may offer similar rates on a home equity loan but will charge different
fees and closing costs. While you’re comparison-shopping, be sure to ask the
lender about costs that you’ll need to pay upfront or that will be built into
these costs are essentially buried in the interest rate, so you can bring down
your rate by paying more on the front end.
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