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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.
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