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Equity
home loan: Best loans with the best
interest rates
Be
careful when someone offers an equity home
loan based solely on the equity in your
home and not your ability to make the
payments. Also, watch out for those
discounted interest rates when shopping
for an equity home loan. We'll discuss
this more below.
Sometimes
with an equity home loan, lenders offer a
temporarily discounted interest rate,
which is a rate that is unusually low and
lasts only for an introductory period,
such as six months. During this time, your
monthly payments are lower too. After the
introductory period ends, your rate and
payments might increase to the true market
level. So, ask if the rate you are offered
are discounted, and if so, find out how
the rate will be determined at the end of
the discount period and how much larger
your payments could be at that time.
Here
are a few tips for when considering an
equity home loan. Call several savings and
loan institutions, banks and mortgage
lenders to obtain information about
current interest rates, fees and points.
Beware of entering into an equity home
loan transaction with anyone who comes to
your door or which you did not initiate or
solicit. Beware of anyone who tries to
convince you to take an equity home loan
offered in connection with an unsolicited
home improvement contract. The loan is
made solely on the equity value of your
home, not on your ability to repay the
loan.
An
equity home loan is simply a second
mortgage. They have fixed rates with
longer terms over a fixed period of time.
These loans are amortized so your monthly
payment is applied to principal and
interest. You receive the amount of money
you borrow in one lump sum. For this
reason, an equity home loan can be ideal
for longer-term financial goals.
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