How to Get a Fixed Rate on a Home Equity Loan
With interest rates at historical lows, locking in your home equity loan rate makes tremendous sense. Homeowners typically access a home equity loan or line of credit to fund home improvements, college tuition or debt consolidation. Fixed home equities offer a set monthly payment at a rate that is fixed for the life of the loan. Before settling on a fixed home equity loan, consider your financial situation, then shop around for the best rate and terms.
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Things You'll Need
- Income pay stubs
- Deposit account information
- Insurance information
- Asset list
- Debt list
Instructions
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Identify which type of home equity loan product is right for you. When deciding on a product, consider how your monthly finances will be impacted with a variable versus a fixed rate product.
Variable lines of credit provide more flexibility because you only pay for the amount of money you borrow, however your rate will fluctuate making your monthly payment different. Fixed home equity loans pays a lump sum of money but offers stability because you always know how much you will pay each month. In addition to traditional fixed and variable loans, many financial institutions are introducing hybrid and relationship type home equity loans that allow you lock in the rate during the term or offer discounts on other products based on your home equity loan.
A stern review of your finances and home equity goals should assist you with determining how a home equity loan can comfortably fit into your monthly finances. Make a goal list and crunch the numbers to help you make a decision.
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Shop financial institutions for the best fixed rate. Although the rate is tied to prime, financial institutions sell lower than others to compete. Pursue fixed home equity loan specials or promotions from local banks or credit unions because these offers are typically associated with the lowest current rate.
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Compare terms in addition to rates. Although a longer term may mean a lower rate, consider how long you want to make payments on the loan. A shorter term for a slightly higher rate may be a better fit. Factor closing costs into your decision, which are sometimes waived during promotional offers.
One place to review a comprehensive, updated list of home equity options is at the Bank Rate Monitor website (see References).
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Submit a completed fixed home equity loan application. Many financial institutions offer an online application option or you can pick up a loan application from your bank or credit union. On the application, you'll be required to furnish information about your income, debts, loan purpose, assets and any other financing you receive.
The application will also provide a space to select the type of mortgage product you desire. Check "fixed home equity loan" to obtain the fixed product.
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Access funds in your home equity loan account. Your rate is locked upon date of approval, usually up to five to seven business days upon application. Funding typically occurs 10 to 15 business days after your application is approved. Some financial institutions offer checks with their product whereas others furnish you with a debit card.
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Start making payments on your home equity product within one month of funding. If you have a checking or savings account at the same financial institution set up monthly automatic withdrawal for ease and convenience.
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Tips & Warnings
Do not change jobs during the application process---changing jobs can directly impact mortgage loan processing.
Avoid moving large sums of money into different accounts or change banks during the application process. The financial institution will be verifying funds and if funds are significantly different, it may hold up processing your application.
Wait to take on new debt. Major purchases during application send a red flag to your lender.
References
- Photo Credit home sweet home image by David Dorner from Fotolia.com
