Finding A Home Equity Loan Or Home Equity Line of Credit (HELOC) At A Low Interest Rate

Finding A Home Equity Loan Or Home Equity Line of Credit (HELOC) At A Low Interest Rate

by Lisa Jones

Refinancing allows homeowners to tap into the equity in their homes for home repairs, debt consolidation, real estate investment, new businesses, etc.

Homeowners can get cash in three ways as follows:

1. Home Equity Loan - A home equity loan is a second mortgage loan that is secured against your home. It is subordinate to your first loan.

2. Home Equity Line of Credit (HELOC) - A HELOC is also a second mortgage loan but it is a revolving line of credit similar to your credit card. You can get a home equity loan for $10,000 and carry that line of credit for many years. Whenever you repay the amount spent, your credit limit increases.

3. Cash Out Refinance - A cash out refinance loan replaces your existing mortgage with a new, larger mortgage loan. You still retain one mortgage loan unlike a home equity loan or HELOC.

Finding A Low Interest Rate Home Equity Loan, HELOC or Cash Out Refinance Loan

The internet has made it much easier to find competitive refinance loan rates. Gone are the days, where you had to call three or four mortgage loan officers to ask what interest rate they could offer you. Today, homeowners can get refinance loan quotes online, within 24 hours or less.

Most importantly, homeowners can get the best and lowest interest rates on the market because lenders compete to service these loans, even for people with poor credit ratings.

When shopping for a low interest rate, the following two factors will help you to get the best rates possible.

Good credit rating

A good credit rating allows you to get extremely competitive rates. A credit rating of 670 or above is considered good. Even if, you have a credit rating between 600 to 650, you can still get good rates.

Loan to Value (LTV)

The loan to value describes the percentage of your mortgage loan to the value of your home. For example, if your mortgage loan is $100,000 and the house is appraised at $125,000 - your loan to value is $100,000/$125,000, which is 80%. The lower your loan to value, the more equity you have in your home, making it easier to take cash out of your home.

Once you get your refinance loan quotes, ensure that you thoroughly understand your mortgage loan terms - the type of loan, points, fees, prepayment penalties, etc.