There are so many different types of home equity loans and interest rates that it can sometimes seem impossible to find the best home equity loan. When trying to find the best home equity loan for you knowledge is power. The more you know and understand going into the loan process the better chance you have of getting the best home equity loan for you.
There are basically three types of home equity loans. The standard term loan or closed end loan, the line of credit home equity loan and the reverse mortgage home equity loan are the three types of home equity loans. Deciding on the right type of loan for you is essential.
The standard term loan is great if you know exactly how much you need to borrow. Standard term loans are for a fixed amount of time, usually anywhere from five to fifteen years, and have lower interest rates than a standard 30 year mortgage. You can usually borrow up to 80% of your homes equity with a standard term loan but some companies have been known to let lenders borrow up to 125% of the homes equity.
The beauty of the line of credit home equity loan is that once the principle is paid back it can be borrowed again. This type of loan is useful for if your not sure exactly how much you will need to borrow. If your looking to pay educational expenses or are doing a do it yourself home improvement project, this might be the loan for you.
The reverse mortgage loan is quickly becoming a very popular home equity loan. The funds from a reverse mortgage home equity loan can be paid out as a monthly income, taken as a lump sum or withdrawn as needed. Interest is charged each month and deducted from the home equity balance.
Next you need to keep track of the current interest rates and decide wether you want a fixed rate, an adjustable or hybrid interest rates. Fixed rate interest rates mean they stay the same through the entire loan, if your going for a really low interest rate you might want this type of interest. An adjustable interest rate is a rate that can be adjusted throughout the term of the loan. A hybrid interest rate is a combination of a fixed rate and an adjustable rate. With a hybrid interest rate the fixed rate stays the same for three to seven years before it becomes adjustable.
Deciding on the best home equity loan for you may seem confusing but once you decide on the type of home equity loan you want and the type of interest you want then the rest is just deciding how to spend the extra money.