How to Shop for Home Equity Loans and Credit Lines

Home equity loans and lines of credit can be a great way to borrow against the market value of your home in order to complete major repairs or to start renovations. However, not all of these types of loans are created equal, and there are steps you should take in order to get the best deal and terms when shopping for home equity loans and credit lines.

Difficulty: Moderate

Instructions

1. Have a thorough appraisal conducted of your home from ceiling to floor, inside and out. Having a good appraisal can change the loan amounts, limits, rates and much more. This will provide you with a good estimate for the next step.

2. Get a comparative market analysis. Most real estate professionals will offer this as a free service to you. The comparative market analysis will contain homes comparable to yours that have sold in the last 6 months in addition to homes that are currently on the market for sale and the dollar value of each respective home.

3. Obtain your property tax report. Tax appraisal reports can be found easily at your county clerks website. Obtain a copy of your current year tax valuations; put all of this together prior to contacting a lender.

4. Compare the terms with your mortgage company. It's best to begin comparison shopping with your mortgage holder because you have an established relationship with them. Ask about the interest rate differences when comparing a home equity loan or line of credit equally.

5. Talk to your bank or credit union. Go to your local branch and ask to see the current rates for its offerings on interest rate differences and associated fees that it would charge if you were to open up a home equity loan or credit line.

6. Compare apples to apples. Using all of the data you have obtained, create a spreadsheet that outlines the different fees for each bank, credit union or mortgage company that you have spoken with.

7. Decide based on the interest rate. Because most home equity loans and lines of credit carry an adjustable rate, look at the base rate and and the amount that it could increase over time. This should be the deciding factor as it is the most prevalent in saving money over the long term of the loan.

Tips & Warnings

• Ask for title company fees and origination fees when shopping. If possible, ask to select your own title company.