Home Equity Loans Information

When evaluating home equity loans you’ll be comparing and contrasting interest rates along with the terms and conditions to which each loan would require you adhere. Examples of some interest rates you might find in today’s market are 4.30% for a 15-year fixed home equity loan or 3.67% for a 5/1 adjustable home equity loan.

The terms “Fixed” and “Adjustable” refer to one of the key terms and conditions of the loan, in this case related to the interest rate. In a fixed rate home equity loan, the interest rate does not change for the life of the loan. Monthly payments are amortized, meaning parts of each payment are apportioned off toward principal and interest in order that the entirety of the loan and all interest accrued is paid in full at the end of the fixed term.

Alternatively, you can get an adjustable rate home equity loan, in which the interest rate doesn’t stay the same. With an adjustable rate home equity loan, you typically start out with an extra-low promotional interest rate that remains fixed for a set period of time and then begins rising (or falling) in relation to an “index”, or a figure representing the condition of the current economy (such as the prime rate). A “5/1 adjustable rate of 3.67%” for example means the interest rate stays fixed at 3.67% for 5 years at which point it adjusts in relation to the index every 1 year.

A third type of loan is an interest-only home equity loan in which all of your payments apply toward interest only for a set period of time, for example 10 or 20 years, with nothing paid toward principal until the term expires, at which point, the remainder is due in one lump sum called a “balloon payment”. The advantage of interest only home equity loans is that your payments remain small for a long time. The disadvantage is that meeting the balloon payment when it comes due can very well prove more challenging than you anticipate.

Choosing which type of home equity loan to apply for – fixed, adjustable, or interest-only – depends very much on your current and future projected resources and your tolerance for risk, as you could lose your home if you default on any of these home equity loans.

Other terms and conditions to examine when comparing different home equity loans include the size of late payment fees and their potential affect on your interest rate, as well as any other possible penalties and hidden fees.

The Essential Home Equity Loans Information Your Lenders Don’t Want You To Know (In A Nutshell):
Don’t Use Your Home As A Cash Machine

In the home equity loans information you receive from your prospective lenders you will no doubt see complete details on how to use your home equity loan to take out cash. Home equity lenders want you to stretch your loan to the maximum amount you can borrow because it means more interest for them. And if you haven’t checked recently, the interest rates on home equity loans—even the competitive ones—are as high or higher than some credit card cash advance fees.