Five Steps to Success in Finding a Home Equity Loan : equity

Posted by on Thursday, June 9, 2011 ? Leave a Comment?

As a homeowner, there will come a time when you will need a large amount of money to deal with an unexpected circumstance such as fixing your roof or any other home improvement related problem. Many of us look to home equity loans for dealing with these difficult financial times. They allow you to borrow money by using your house as collateral.

Banks and other lenders look favorably upon home equity loans since can?t default on the loan with the ownership of your house on the line. In other words, they will undoubtedly collect on the collateral since payments are a priority.

The important thing to do is get your homework done first if you are thinking about taking out some equity from. The time spent looking into your options can save you a good deal of money later on. Use these tips for trying to find the best home equity loan:

Shop for the best deal ? The best place to start looking for the best deal on a home equity loan is with you existing bank or credit union. There are also various reputable online companies who can offer you some pretty good figures. The key is to keep looking around until you find something you like. Be aware of any scams or too good to be true promises. You?ll end up regretting it in the near future.

Know the facts ? One of the things you should know when looking for a home equity loan is all the things they can be used for and how to get them. For example, loans taken for home improvement reasons fall into the subject of either being a home equity loan or a home equity line of credit. While they both sound the same, there are a few subtle differences between the two. Know the basics of each before deciding on which works for your circumstances.

Always ask questions ? You should know a good amount of information on all the factors that go into a loan such as points, APR, and closing costs. You?ll find a detailed list of these items in the Good Faith Estimate. This is a document the lender must give you within three days of receiving your loan application. BE aware that that a home equity loan?s APR includes the closing costs in it and a home equity line of credit?s APR does not.

Choose the best rate structure ? Did you know that the rates for a home equity loan can either be adjustable or fixed? Adjustable loan interest rates tend to fluctuate up and down which leaves you vulnerable to the risk of increasing payments. More people choose a fixed-rate loans since they come with less risk. The problem with these is it sometimes ends up costing more in the long run when homeowners chose to sell their home later on. If you are unsure about how long you plan on owning the property, consider going with a hybrid adjustable loan. They are sometimes beneficial due to the fixed introductory rate.

Know your closing costs ? Another great piece of information you can get from your Good Faith Estimate is a quote on closing costs. Just remember, the actual costs at closing are more than likely to be different from the estimate. Don?t budget for the amount of your estimate only to find yourself unable to pay more. The problem is that the majority of the fees involved are through third parties. Your lender has no control of them.

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Source: http://equity.letsgetearn.com/309/equity/five-steps-to-success-in-finding-a-home-equity-loan

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