home equity loans and rates


How a Home Equity Loan Rate Is Determined

Lenders consider a number of factors in determining a house equity loan rate. 1 of the most essential elements a lender will use to establish the property equity loan rate for an individual customer is credit history. A negative credit history or insufficient credit history can mean paying a higher interest rate than an individual who has sufficient good trades on his credit history. Of course, poor credit will likely not stop you from acquiring a property equity loan considering that it is fully secured, but it will most undoubtedly have an effect on the interest rate you will pay.

Ratio of loan to appraised value

home equity loans and rates


How a Home Equity Loan Rate Is Determined

A different factor that may possibly have a detrimental effect on the percentage rate is the ratio of loan quantity to appraised value. The higher that ratio is, the greater your house equity loan rate will be. In other words, borrowing 70% of your equity will price you less in interest than borrowing 90%. This may well not hold true with all lenders, but quite a few lenders do tie interest rates on a residence equity loan to the percentage of equity that is borrowed.

Repayment term

home equity loans and rates


How a Property Equity Loan Rate Is Determined

In some circumstances, a lender will offer you a additional favourable home equity loan rate if you accept a shorter repayment term. This is not usually the case, but some lenders do give it as an incentive to encourage you to pay the loan off sooner. If you accept a shorter payment term, you have the added benefit of paying much less interest over the term of the loan, an incentive in itself, especially if you are not in a position to claim the interest as a deduction in tax liability.