Securing a Low Home Equity Loan Rate on Your HELOC

By Kelly Richardson Columnist

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A home equity line of credit can be a great way to consolidate high interest credit cards and finance that home improvement project you've been putting off. And if you play your cards right, you can secure a low home equity loan rate that could potentially save you thousands in mortgage payments.

A home equity line of credit, or HELOC, allows you to borrow a percentage of your home's value and receive the funds at various intervals dictated by the loan agreement. You can think of it as your personal credit line, with your property existing as the collateral. A home equity line of credit is a good idea if you plan on staying in your home for an extended period of time. Turning home equity into value-adding renovations is a popular way to make money on the resale of your home.

Low HELOC Loan Rates

  • » Improve Your Credit. Mortgage lenders always extend preferential treatment to borrowers with a good credit rating. Pay off your debts, clear up any credit discrepancies, and you'll see offers for low home equity loan rates.
  • » Shop Your Business. The home loan market is highly competitive. Use the power of competition to your benefit by shopping your business to several lenders. Don't just look at the introductory rate. HELOC rates are always adjustable and generally calculated based on the prime rate. Look at what the lender is adding to the prime rate (the margin) because that determines the rate you will ultimately pay.
  • » Borrow Under the Limit. Chances are, when you apply for a HELOC loan, you'll get a borrowing limit that is in the tens of thousands of dollars. Secure low rates by not borrowing to the limit of the offer.
  • » Make Your Payments. Once you enter into a HELOC arrangement, make sure that you pay your mortgage on time. This avoids late charges, credit dings and keeps the APR from increasing--some loans contain terms that increase your APR if you default or pay late.
Following these sensible guidelines will do several things for your financial situation. First and foremost, you'll be sure to get the lowest home equity rates possible. Also, you'll be a preferred borrower of your lending institution and your future borrowing needs will be taken care of.

About the Author
Kelly Richardson covers the real estate scene in major cities across the country. His articles appear in educational journals, periodicals, and e-zines.

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