How Home Equity Mortgage Loan Terms and Conditions Vary between Lenders

Home equity mortgage loan is the same thing is home equity loan or loans where the borrower's home serves as a collateral. Borrowers can use them to finance anything from home repairs to college education. Their terms are no longer quite as generous as they used to be prior to the 2008 market downturn, but borrowers can still use them to access a considerable amount of money. Each home equity loans comes with a number of terms and conditions. They tend to vary depending on the lender, sometimes drastically so. Before they decide which home equity loan they should buy, borrowers should look at those factors and use them to figure out which home equity loan is right for them.

Home Equity Mortgage Loan Value

The home equity loan value is determined based on the value of the borrowers' house. These days, it is usually no more than 75 percent of the value. However, many lenders will go lower than that. Some of those lenders may be willing to raise the percentage if the borrower has a good credit history and/or if the borrower already took out one of their loans.

Interest Rates

All home equity loans have fixed interest rates. This means that the interest rates will remain the same until the loan is fully repaid. However, interest rates don't start out the same. Borrowers should try to find the home equity loans with the lowest interest rate possible. That said, they should keep in mind that many lenders will try to make up for loss of profit that results from low interest rates by extending the loan terms. While the interest payments would still be small, borrowers will make them over longer periods of time. In the end, they won't save as much money as they hoped. This is why borrowers may want to look at interest rates as well as the loan's payment period and try to find a home equity loan where both numbers are low.

Loan Term

As mentioned above, mortgage terms - the amount of time borrower has to pay off the loan in full - vary between lenders. They can be anywhere between seven and thirty years. In many cases, the lenders will offer home equity loans with different mortgage terms. In others, the mortgage loan term may depend on the borrower's credit history and/or income. Ideally, borrowers want to be able to repay their loans as quickly as possible, but it should not come at the expense of low interest rates.

Credit History

Generally speaking, home equity loans are easier to qualify for than other loans, but it doesn't mean that lenders will except just anyone. Each lender has a minimum qualifying credit score - anybody whose credit score is below it is ineligible for their home equity loans. The borrower's debt history may also be a factor. While having unpaid debts in the past may not necessarily count against the borrower, the lender is likely to rule out any borrower who had unpaid debt a certain number of years ago.

Application Fees

When the borrower applies for a home equity loan, lenders reserve a right to charge the borrower certain fees. The types of fees vary between lenders, and different lenders may charge differently for each fee.  Some of the most common fees include the appraisal fee, processing fees and the closing fee.  Borrowers should try to find lenders that charge as few fees as possible -contrary to common assumption, the number of fees is not necessarily reflective of the quality of service. Alternatively, some lenders may be willing to negotiate with the lenders