Should You Choose a Fixed Rate Home Equity Loan?
With so many people deciding to cash in on their home equity these days, lenders are springing up everywhere to offer both a variable and fixed rate home equity loan to homeowners who want to pay off bills, buy a new car, or remodel their homes. These loans offer home owners who have faithfully paid their mortgage payments the ability to cash in on the value of the home they have worked so hard to pay for, and take care of other debts and expenses.
But knowing whether it is better to have a variable or fixed rate home equity loan has been quite a puzzle for many home owners. That is why we have tried to bring you all of the best information concerning both types of home equity loan, so as to help you make a better, more informed decision as to which type will work best for you.
Variable or Fixed: Which Rate to Choose?
The first thing you must understand when trying to decide between fixed and variable rates on a home equity loan is that, although the variable rates may look good at the time, only a fixed rate home equity loan will never change the amount you have to pay back each month. With a variable rate loan, your monthly payment will change each and every time the current interest rates change.
A fixed rate home equity loan stays at the exact same interest rate for the entire life of the loan, whether that is five years, ten, or even more. With a fixed rate loan, your monthly payments will never change, regardless of what the current interest rate is, or any interest rate law changes that may occur.
If you are considering a variable rate loan, instead of a fixed rate home equity loan, you should only do so if you plan to pay the loan back within just a few years. Having a long term variable rate loan has put many a home owner in danger of having their home repossessed, once they were unable to make their new, higher mortgage payments when the interest rates changed.
For most people, the smart choice will always be a fixed rate home equity loan. If someone is pressuring you to take a variable rate loan instead, it is a good idea to be wary of that lender, as it may be one of the many scams that has recently come to light in view of recent interest rate law changes. It is in your best interests to get a fixed rate home equity loan whenever possible, to protect both your home and your family's future.
