Before you decide to apply for a home equity loan, you need to make sure that this is in fact what you need. A home equity loan will have a fixed rate, however, a home equity line of credit will allow you to get some money whenever you need it and offers a variable rate. Both have advantages and disadvantages that you will need to weigh for yourself.
However, since both are secured by the collateral in your home, there are a few questions that you need to ask beforehand:
-Is the annual percentage rate fixed or variable? Will the amount change after the introductory period? And how often will the rate change?
-What is the most that the rate can go up to during the lifetime of the loan?
-What are the other fees and closing costs that will be added to the loan?
-Does the adjustable loan allow you to convert to a variable loan? If so, are there a certain number of times that this is allowed?
-How long will the money be available?
-What index are using to calculate the rates? And how often does this index change?
-Are than any fees or penalties for paying off the loan early?
-Are there any benefits if the borrower has numerous accounts with the lender?
-Is there a minimum amount that you have to withdraw when you do access your line of credit?
-Is there a balloon payment due at a certain point or are the payments fixed?