Things to Know Before Applying for a Home Equity Loan

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?

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