With a home equity loan, you can borrow money at a low interest rate based on the value of your home. Your home is your collateral, which makes it less risky for lenders to give you a loan. Home equity loans also have different terms, so you can choose the one that works best for your money.
How Home Equity Loans Work
With a second mortgage or line of credit, you can use all or part of the equity in your home to get cash. Most of the time, the rates on home equity loans are a couple of points higher than those on regular mortgages. In some situations, you can get a better deal if you refinance your first mortgage and take out cash at the same time.
Your first lender doesn't have to be the same one who gives you your home equity loan. In fact, you should compare rates and fees from different places to make sure you're getting the best deal.
With home equity loans, you have more choices.
When it comes to your home equity loan, you have more choices than just how your rates are set up. Loan terms are flexible, and many of them can be refinanced. You can choose to only pay interest for a few years and then switch to a structured payment plan.
You only borrow what you need with a line of credit. So, payments are like credit card bills in that you have to pay at least a certain amount. You could also choose a lump sum payment, which is great for making big changes or combining bills.
Find the Loan That's Right for You
It can be hard to find the right home equity loan for you when there are so many to choose from. Start by choosing the loan terms that work best for you, whether that's a second mortgage with a large lump sum payment or a flexible line of credit.
Next, look into lenders based on the loan terms you want. Ask for loan estimates, but don't give out information about your credit score just yet. Only give a lender permission to look at your credit score if you are really interested in getting a loan. Your credit score will drop unnecessarily if you do too many credit checks.
Look at the APR for the total cost of the loan when comparing offers. But you should also find out about any annual or other fees. They can easily add up to a couple hundred dollars over the course of a year.
You can find a competitive lender and be on your way to getting a low-interest equity loan within a day.
