When you're looking for a home equity loan, a major part of the process comes down to getting the best equity loan rate. Successfully getting the lowest equity loan rate can save you thousands of dollars. Here are the top 10 tips for making sure you get the best equity loan rate available to you, and traps to avoid along the way.
1. Ask your family and friends what their equity loan rates are and where they got them. Referrals for equity loan rates are often a great way to start your search.
2. Decide whether you need an equity loan rate for a 15-year or 30-year mortgage. The equity loan rates for the 15-year loans will probably be more attractive and you'll be mortgage-free quicker, but you have to calculate whether you can afford the bigger monthly payments.
3. Shop around for the best equity loan rate. Contact several lenders to compare equity loan rates, including banks, savings and loans, credit unions and mortgage brokers. Don't hesitate to make lenders and brokers compete for your business by lowering their equity loan rates.
4. Manage your credit score before applying for equity loan rates. Make sure your credit information is accurate and clean, because credit report problems could adversely affect the equity loan rate you can qualify for.
5. Compare your equity loan rate offers to others you see on websites and ads. Read ads for home equity loan rates in your local newspaper, on the Internet or just through Yellow Pages ads for lenders, asking them what types of equity loan rates they offer, to see whether your equity loan rate is impressive ... or at least competitive.
6. Do the math on your equity loan rate to make sure you can afford the payments. Ask yourself several crucial questions about your equity loan rate: What will the exact monthly payments be, and can you afford them? Will the equity loan rate change over the life of the loan -- if so, when will it change, how often will it change, and how much will it change? Do your long-term budget to make sure the equity loan won't be a burden.
7. Avoid ballooning equity loan rates. Know whether your equity loan rate deal involves any balloon payments. Maybe your equity loan will start off with very affordable payments, but balloon to huge payments after a period of time. Make sure your contract does not involve this type of equity loan rate.
8. Be aware of equity loan rate scams. Be extremely careful if a lender calls you or sends you mail or even just appears at your door offering you an equity loan rate. And don't accept offers from home repair contractors to arrange an equity loan rate or loan for you.
9. Figure out whether securing a lower equity loan rate is worth paying points. One point is equal to 1 percent of your equity loan amount, and usually the higher the points, the lower the equity loan rate you'll pay. Do the math to decide whether it's worth it to pay the higher fees upfront to secure a lower equity loan rate.
10. Ask yourself whether you need an equity loan rate in the first place. Depending on your needs, a simple credit card could offer a better rate and option than an equity loan, and credit cards have one major advantage: They don't put your home at risk for late payments or foreclosure.