Home equity loans are secured with the value of your home so you qualify for low rates. By selecting a home equity loan rather than a cash out refi, you save on closing costs and application fees. And just like with your first mortgage, home equity interest can also be used as a tax deductible in some cases. Lower Rates, Lower Fees Secured loans, like mortgages, are cheaper than unsecured loans, such as credit cards. Home equity loan rates are usually 1/3 to 1/2 of unsecured loans rates. That means that your payments are smaller and for a shorter period. Home equity loan application fees are also cheaper than a refis closing costs. Since the loan amount is smaller, many of the loan fees are waived or eliminated. Closed home equity loans do have some application fees, but most lines of credit dont. Keep 20% Equity For Lower Rates By keeping 20% of your homes equity intact, you will qualify for lower rates on your home equity loan. One way around this is to get your homes price reassessed to current market value. You always have the option of cashing out 100% of your equity, just plan on higher rates. Tax Consideration Unlike credit card or personal loan interest, home equity loan interest can be written off in some cases. In order to take advantage of this rule, you need to be able to itemize your deductions. Interest on loans of $100,000 or less qualifies. Other restrictions apply, so check with the IRS or your tax accountant. Better Loans With Research To find the cheapest rates and fees, take some time to investigate lenders. By using the internet you can quickly sort through posted home equity loan rates. For more accurate numbers, request a loan estimate from a number of lending companies. When looking at a loan offer, ask about the fees as well. Home equity loans may have annual fees for processing or keeping a minimum balance. Also ask about how long rate quotes are good for. In some cases you can lock in the rate by applying online; others will require access to your credit report to determine your loan rate. |
