3 Features to Look for in a Home Equity Mortgage Loan
A home equity mortgage loan can benefit homeowners in a number of different ways. They allow you to access the equity that you have accumulated over the years without worrying about selling the house. A home equity mortgage loan can be used for home improvement, debt consolidation, or a number of different things. In most cases, you are free to do whatever you want with the money. If you have never applied for a home equity loan before, you might feel a little lost. Here are a few things that you should look for in a home equity loan.
1. Low Interest
The first thing that you will want to look for in a home equity loan is a low interest rate. This is what you should base most of your comparisons on. When shopping for a rate, you should compare interest rates between the different brokers out there. The advantage of getting a home equity loan is that you can get a lower interest rate than other forms of credit. Credit cards typically charge a much higher interest rate than most home equity loans. Therefore, if you get a home equity loan with a high interest rate, you will be negating much of the appeal of the loans in the first place. A low interest rate will save you money in the long term and make your monthly payment lower.
2. Longer Terms
When you are shopping for a home equity loan, look for a loan that offers you a longer repayment term. The longer your repayment period, the lower your monthly payment will be. As long as the loan does not have a prepayment penalty associated with it, you can always pay more than you have to. However, a longer term will present you with the flexibility that comes with a lower payment. If you are running short of funds in a particular month, you can just make the minimum payment. If you have extra money the next month, feel free to pay extra. A longer term means increased flexibility for you and your financial situation.
3. Fixed Rate
There are a number of different home equity loan products out there that offer you an adjustable rate. While it might seem like an attractive option at first, it can really hurt you in the long run. They might offer you a lower payment at the moment because of an introductory rate. However, after the introductory rate is over, your rate will become an adjustable rate based on the prime interest rate. If the prime interest rate goes up, you could be paying a lot more for your monthly payment as a result. Over a period of several years your monthly payment could go up quite a bit. A fixed interest rate will allow you the stability that comes with knowing exactly what your payment will be each month. For those on a budget, this is a great asset to have.