Home equity rates are currently below 4%, depending on your credit, so if you've been considering taking out a loan, now might be the time. There are many factors that determine home equity rates. Here's some information that will help you find out what kinds of home equity rates you qualify for, and how to get the lowest rate possible.
An obvious factor affecting your home equity rates is your credit score. It's a good idea to obtain a copy of your credit score to begin with, so you have an idea of what your credit is like. Just contact one of the three major credit bureaus (Equifax, Experian, or TransUnion) via phone or internet for a copy of your credit history, and include the credit score option, which takes into account all the information in your credit history to give you an overall picture. If your score is above 660, your credit level is considered “acceptable.” Between 660 and 620 is “uncertain” and below 620 is “high risk,” which could make it very difficult for you to obtain a loan. If you are above 750, expect to get the best home equity rates out there.
Your credit score, however, is not the only factor that goes into determining your home equity rates. Both the amount and the length of your loan also influence the rate you will get. The greater the amount of your loan, the higher the rate will be, similarly, longer loans also get higher home equity rates.
Closing costs and other fees affect home equity rates as well. We've all seen those ads that guarantee “No points, no closing costs!” The reason they are offering this is usually because they more than compensate for the lack of closing costs by jacking up the home equity rates. Avoid falling for this by looking at the cost as one piece, know how much you will be spending overall in closing costs, interest, and other fees. Usually, the more you pay up front, the lower the home equity rates will be.
What type of loan you get determines your home equity rates. Generally, if you get a loan that has a variable rate, they will start you off at a lower rate, and if you get a line of credit instead of a loan, home equity rates are also generally lower, at least initially. For most people, the security of having a fixed interest rate outweighs the possible savings of the variable, but don't automatically rule it out as a possibility.
Finally, comparison shop. This is possibly the best and easiest way to get a lower rate. Compare home equity rates and fees from various lenders, look online and at your local bank or credit union, but whatever you do, know your options so you can select the best one. Most people have busy schedules, but you won't regret the time spent if it saves you thousands of dollars.
Low home equity rates can be used in many ways. If you plan to purchase a car anytime soon, consider financing it with a home equity loan, it might be the least expensive way. If you have high interest debts, such as credit cards (many have APRs of over 20%!) you might want to use your home to help you pay these off, replacing your high interest with the low home equity rates. If you are in need of a loan, keep in mind the savings in interest you will probably get by taking advantage of low home equity rates.