How to Get the Lowest Rate Home Equity Loan

Lending companies, banks, and online companies that offer loans provide home equity loans that come in varying packages inclusive of the elements like allowable amount to be loaned, the interest rate, the payment scheme, the payment agreements, and other matters. To get the best among home equity loan deals both online and around your local area, here are some tips that you ought to apply:

Know everything that you need to know about a home equity loan

Learning all about home equity loans will allow you to make good choices and decisions. So, in order to get the best deals, you have to actually know what a home equity loan is.

Home equity loan (HEL) is different from mortgage loans and refinancing loans. Note that this is the kind of loan that you will get when you use the equity of your home as the collateral.

To add to that, you have to keep in mind that when you get a home equity loan, you will not increase the original mortgage amount that you borrowed. Instead, you are getting a second mortgage. This means, a second mortgage demands a different payment from that of the first one. So, you will have to pay two mortgage bills every month- one is for your original mortgage loan, while the other one is for your home equity loan.

Another thing that you have to know when picking a home equity loan is the basis of its interest rate. Note that home equity loans usually have higher interest rates than that of your mortgage loan. This is because of the fact that a second mortgage is considered riskier that the first one.

Realize that your credit score matters

Despite the fact that most lending companies offer a higher interest rate when it comes to home equity loans, you need to understand that your credit score will still affect the rate that you will get.

Generally, a credit score indicates your capability to pay for the money you are borrowing. It serves as the lending company’s ultimate gauge for your creditworthiness. As such, the higher your credit score is, the more credit worthy you are deemed to be. And as a result, the more “creditable” you are, the higher are your chances of getting a lower interest rate on your second mortgage.

If you have a good credit score, then go ahead and get your home equity loan right away. However, if you are suffering from a low score, make it a point to fix your credit record first before you make a move in applying for an equity loan. Keep in mind that the only way to get a good deal is to provide a good credit track record as well.

Explore your choices

Avoid plunging into the first home equity loan offer that you see. Getting a good deal requires you to look for the best options that are available. Inquire about home equity loans from credible lending companies and get quotes on their loan package such as their interest rates and the service fees that they charge.

Also, be aware that while you are shopping around, most interest rates for home equity loans are not fixed. Almost everything is negotiable now. So, do try to negotiate about the home equity loan packages that you are planning to get.


The Basics of a Home Loan

What is a home loan?

A Home Loan is a loan, or financing, that you take for the purpose of buying or renovating your home. The facility of Home Loan makes it easier, and more affordable, to make or buy your dream home. Most banks and many different kinds of financial institutions offer home loans to the public at fairly low interest rates. Whether it is for the purpose of buying a house or apartment, or constructing one, a home loan can be the simplest route towards achieving your dream.

How much can I get?

The actual amount of the loan you are eligible for, or can get, varies, and depends upon many factors such as your capacity to repay it, your age, your family income, the number of dependents you are responsible for, and so on. The amount of the loan will also depend upon the tenure of the loan and the current interest rate. Tenure is the total amount of time that you are given for the repayment of the loan. Most institutions and banks will extend home loans for the purpose of buying a house or even a flat, for renovation of an existing property, or for extensions or repairs to be made to your existing home. However, in the case of buying a second property, when you already have one house or flat, most banks will have a different policy and set of rules, so be sure to ask some relevant questions and get clarifications about the specifics from your bank before you sign.

Home loan process

There is a process for seeking a home loan, which partly depends on your need for information ad clarification, and partly on the internal bank processes. The first step is to apply to a few banks and financial institutions, and begin the process of comparing rates and tenures. (Or you can compare rates on our sites). Once you have decided on the bank, the steps are as follows.

· Filling out the relevant applications and submitting the necessary documents.
· The sanction of the loan from the bank or financial institution depending on their criteria for age, repayment capacity, and property value.
· The disbursement of the loan, transferring the home loan amount to you via check.

There will be some documents which are required before the bank will sanction or disburse your home loan. The information in these documents will decide whether or not you are given the loan, as well as the interest rate you will be charged, and the tenure that will be allowed.

These documents include:
· The application form, filled out correctly and truthfully
· Passport size photographs of the applicant and co-applicant (if any)
· The record of your repayment record for any existing loans
· photo ID
· Proof of age
· Proof of residence
· Signature verification
· A copy of the sanctioned plan for the house/flat
· Loan sanction letter
· A check for the processing fee amount
· Additional documents that are required may include
· Bank Statement for the salary account for 6 months (personal/current account in case of business owners)
· Income Tax return for up to three years
· TDS Certificate (for employed)
· Copy of company issued Identity card
· Salary slip and Form 16 for three months (for employed)

Home loan tips

· Do some homework before you apply for a Home Loan.
· Figure out how much of your income you can afford to pay as EMI.
· Check out bank rates to get a rough idea of how much your total loan can come to and look for properties in that price bracket.
· Different banks and financial institutions offer different interest rates for home loans, so compare rates and processing fees before you decide on a particular bank.
· Take your time, don’t be in a hurry. Discuss all aspects of thee loan with the bank, and get complete information about terms, conditions, waivers and so on.
· When you get the form, and the loan document, be sure to read through the fine print and ask for clarifications on any point you don’t understand.