Fixed Home Equity Loan

A fixed home equity loan is defined by the fact that its annual percentage rate (APR) will not increase. These types of loans are the most common of the home equity loans. The whole idea behind refinancing in order to access your homes equity is to lower your interest rate and at the same time borrow. At the time of writing, this is a good time to get a fixed home equity loan as you can obtain one at an APR of about 5%.

Reasons to get a Home Equity Loan
Debt consolidation is probably the most common reason for getting a home equity loan but, home improvements, debt consolidation, college tuition, medical bills, etc, are all important reasons as well. If you’ve lived in your home a few years and have been making your mortgage payments, your home has hopefully built up a bit of equity.

Getting the Lowest Rate on your Home Equity Loan
The best way to do this is to get banks to compete for your business. Shop around and get quotes from at least three different lenders. This shows others that you are serious and when you negotiate the terms of your loan it also gives you an interest rate to show another lender to either meet or beat. Sometimes the difference between percentage rates are tenths of a percent, but let’s take 4.9% APR and compare it with 5% APR. On a $100,000 home equity loan that .1% adds up to $100, but over the course of 30 years, it comes to $3,000. So every little bit helps especially when it comes to getting a fixed rate home equity loan.

Home Equity Loan Refinancing Options
The two main options are how much to borrow and how long to borrow it for. In regards to the first of these two options it is a good practice not to borrow more than 80% of your homes equity, but there are some lenders who will approve a 100% or even 125% amount of money should you need it. The duration of a loan can be anywhere from one year to 30 years with a good average of 20 years.

Other options that you may have can include rolling the closing costs into the principle of the loan, paying points to reduce the interest rate (points are upfront payments that usually amount to 1% of the total amount to be borrowed), variable or fixed rates (variable rates are better for short term mortgages because they usually start out low and then increase bit by bit over the years), there is also escrow (a small amount of money is added to your monthly payment to cover the cost of property taxes and house insurance) and administrative fees that can be negotiated.

Home Equity Loan Interest Rates
The difference between rates varies from lender to lender. Interest rates are usually set by the Federal Reserve, but it is up to the individual lender to utilize that number. In the later quarter of 2009 the average interest rate for a 30 year fixed rate mortgage was about 4.5% according to the Federal Reserve. If you have good credit and can make a good faith payment or buy some points, you can get an interest rate even lower than that.

Getting a Fast Home Equity Loan
In some cases the approval process can take up to six months, usually it takes about three months on average though. The best way to speed things up is to get out all that paperwork. Have the necessary documentation ready, you may even want to have photocopies ready to give to the loan officer. Examples of the documents that you may need are a birth certificate, driver’s license, state identification, bills with your home address, your phone bill, pay stubs, bank statements, tax statements, property deeds, etc.

Other things that can help you get approved fast are online applications or applications over the phone. You can also apply to pre-approved or pre-qualified offers. Responding quickly to requests from the lender for documentation is of the utmost importance when it comes to speeding up the process. One sure bet is to schedule and pay for an appraisal on your homes value before you even apply. With the right circumstances you can get approved and see your money in as little as 30 days.

Get a Good Home Equity Loan: Shop, Compare and Negotiate
You can get a lot of research done online and this is an excellent place to start. You can also research topics about home equity loans and get advice; after all you’re reading this aren’t you? Once you have a good feel for the housing market, current rates and options, you can make some phone calls and set up some face time with lenders. You’ll want to take what you have learned online and on the phone to the loan officer and let them know what you have found. They may be willing to negotiate a lower interest rate if they see that you have offers from other companies. Get quotes! Don’t just ask for some information, get it in writing. This gives you some leverage for negotiations. You’ll also want to compare closing costs, fees and other expenses that are involved with getting a home equity loan, mortgage or refinancing.

Types of Loans
An Adjustable Rate Mortgage (ARM) when compared to a Fixed Rate Mortgage (FRM) can often come out with similar results, but an ARM can become beneficial under certain circumstances. As an example, an FRM may be set at 5.5% whereas an ARM can start out with a 3/1 ratio where for the first 3 years you have an APR of 4.25% and then your rate and monthly payment are recalculated. An ARM is better for short term living in the home that you are financing.

A Home Equity Line of Credit (HELOC) can be a good way to pay for the things you need without shelling out 15% when you use a credit card. This is a good way to keep yourself from borrowing too much, plus what you pay back into the HELOC you get to borrow again.

Federal Housing Administration (FHA) and Veteran Affairs (VA) offer low interest, low monthly payment home equity loans and mortgages to those who qualify. If you were in the military or are in low income housing, you may want to seek out an FHA or VA home equity loan that can be locked-in at a lower fixed APR.

Bad Credit Home Equity Loans
Even if you have bad credit you can get a loan. The main thing you need to prove in this case is your income. The lender will want to know about your employment history. If you make enough income to not only cover living expenses, but also a monthly payment, you’ll be more likely to get a bad credit home equity loan. If one lender qualifies you and you get a quote, it might benefit you to take that to other lenders to see if they can make a better offer. So, even if you have bad credit you should still shop around for a low interest rate.

For a 15, 20 or 30 year mortgage, a fixed home equity loan is a good choice. You can use your home as collateral, cover large expenses and lower your interest rate. But before you sign on the dotted line, be sure to read everything over and ask questions. No question is a stupid question when it comes to something this important.