subject: Have Clarity on Different Aspects of Home Equity Loans before Applying for One [print this page] Have Clarity on Different Aspects of Home Equity Loans before Applying for One
When raising money to buy a home, a mortgage is the most commonly used method by one and all. Another popular way is to take a home equity loan which in essence is a second mortgage taken against your equity in the home. Compared to other kinds of loans, the rate of interest rate you pay for a home equity loan is less, and that is what we all look out for when we take a loan.
Your mortgage lender will scrutinize some facts and figures like your credit score, your repayment history with other banks and lenders and the existing mortgage on your house before he offers you a precise rate of interest that suits both of you.
Once a particular rate of interest is agreed upon, you can choose between a fixed or variable rate your lender offers on the home equity loan. With variable rate of interest, your lender enjoys more protection because he has the liberty to push the interest rate higher when market lending rates go high and so, may offer you a lower rate of interest. As a borrower, you may prefer a fixed rate loan because it saves you from paying higher interest rate even when the market rates go high. A fixed rate might be slightly high.
A home equity loan is a safe bet for the lender because it is backed by the house. The risk involved in such loans is quite less when compared to an unsecured loan. So you may be in an advantageous position when negotiating for a good deal. You can consult few lenders before taking your final decision.
It is also observed that a home equity loan is generally a second mortgage which is taken when you have paid a portion of your existing mortgage. Depending on the equity you have on your home, you may be able to get a better part of the market value of the home as your home equity loan. Consulting an expert who has a good idea of the prevalent mortgage markets can help you find the right mortgage financing agent and lender.
