Finding a Low Interest Home Equity Loan
When acquiring a home equity loan you basically borrow against the equity you have available in your home and typically you receive the money in a lump sum. When taking out this type of loan you are using your home as collateral in order to acquire the loan and thus there is a risk you could lose your home if you fail to make the loan payments.
Before you accept a home equity loan, check with numerous lenders in order to get the best deal. You can shop online while searching for low interest home equity loans.
When reviewing the various loan offers that are available be sure you do a comparison of the annual percentage rate (APR) which allows you to know your cost of credit on a yearly basis. The APR rate mentioned by the lenders is typically based on just the interest. In order to get the best deal for a low interest home equity loan that is available you need to look at the other financial charges that are included in the loan such as points and closing costs.
Variable Interest Rate Loans
People who are seeking low interest home equity loans are sometimes attracted to variable interest rate loans. This type of loan will typically allow you to pay lower monthly payments at the early stages of the loan but as time goes by the monthly payments typically go up. A fixed interest rate will usually be at a rate that is a little higher than the variable loan rate but the rate does not increase over time.
If you are considering taking on a variable rate loan make sure you get information about the periodic cap which sets the limit on changes in the interest rate at one particular time. Make sure you review the lifetime cap which is the limit that has been placed on interest rate changes during the whole time you have the loan.
When shopping for low interest home equity loans it is important to ask the lender which index he uses to determine how much your interest rate will increase or decline. A lot of lenders use the prime rate for their index. Ask the lenders how often the index rate is allowed to change. Also, a margin is added to the index when they determine the new interest rate you will have to pay.
Discounted Interest Rate
Lenders sometimes offer low interest home equity rate loans in the form of a discounted rate. Although a discounted interest rate will be lower than a standard rate, the lower rate that you receive lasts for a short period of time, such as six months. After the discounted rate is over your interest rate will go higher and will be set by the index and the margin. Also, those who have an excellent credit history have the best opportunities to receive a low interest home equity loan.
