Home Equity Line of Credit
Type of Loan:
Home Description:
Your Credit Profile:
Current Rates Trend
Home Equity Rates
PRODUCT +/- Rate Last week
30 year fixed Graph Icon Arrow 4.09% 4.16%
15 year fixed Graph Icon Arrow 3.25% 3.30%
5/1 ARM Graph Icon Arrow 3.28% 3.36%

 Rate disclaimer

PRODUCT +/- Rate Last week
30 year fixed refi Graph Icon Arrow 4.09% 4.17%
15 year fixed refi Graph Icon Arrow 3.25% 3.34%
10 year fixed refi Graph Icon Arrow 3.15% 3.18%
PRODUCT +/- Rate Last week
60 month used car loan Graph Icon Arrow 3.20% 3.20%
48 month used car loan Graph Icon Arrow 3.18% 3.19%
60 month new car loan Graph Icon Arrow 3.44% 3.44%
PRODUCT +/- Yield Last week
6 Month CD Graph Icon Arrow 0.75% 0.71%
1 Year CD Graph Icon Arrow 1.24% 1.24%
2 Year CD Graph Icon Arrow 1.41% 1.41%
MMA and SAVINGS 0.58%
$10k MMA 0.57%
Interest Checking 0.43%

Mortgage Brokers & Lenders Directory

You can search our directory or Mortage Brokers & Lenders and get a current quote on 30 year fixed mortgage rates as well as current mortgage interest rate for other loan programs.

Mortgage Brokers:

Home Equity Line of Credit - HELOC

Written By:
May 26, 2010 at 11:36 AM

Most homeowners use a home equity line of credit (HELOC) when they need to make improvements to the home. It makes sense to leverage the untapped value to increase the home’s value for the long term. For many years, homeowners misused these lines of credit for paying off smaller bills and trivial expenses. Over time, using an equity line this way is a recipe for financial disaster.

How a HELOC Works

Home equity plans often set a fixed time while you are allowed to borrow money, typically ten years. When this "draw period" ends, borrowers may be offered a renewal of the line of credit. Plans that do not offer renewals will either demand full payment at the end of the draw period or allow repaying over a set time, usually a ten-year "repayment period."

To illustrate, consider our homeowner Beth. She owns her home outright, but it needs some repairs. She has many options available, but has decided to go with a HELOC. This loan has cheaper closing costs and the most flexibility. Now she can be sure she has enough money to cover all the necessary repairs.

Shopping for a HELOC

But shopping for a HELOC is challenging. Lenders will sometimes offer temporarily discounted rates, which then spike after six months. In addition, the margin on a HELOC is different for each lender. The margin is the additional interest charged above the prime rate that sets the HELOC rate.

For example, if Beth secured a loan with a starting rate of 5% for 6 months that was “based on prime,” she might assume that because her starting rate was locked in at 1% above prime that her ongoing margin would remain 1%. But “based on prime” does not mean that the regular interest rate will be set the same way as the introductory rate. It only describes the relationship of the changing margin to prime. The margin could go up to 5% for a total rate of 9%!

That’s why Beth should be careful to ask about the margin on the loan. She should ask for the terms in writing, stating both the introductory rate and the margin. She should also find out if there is a minimum draw at closing and how much that draw would be. Many loans require borrowers to take out money right away so that the lender can start earning interest right away.

Some loans also carry a required average balance. They might charge upfront lender fees, third-party fees, cancellation fees and annual fees. Beth should make sure she has all of these fees in writing, even just to say they do not apply to the loan, before she signs on for any home equity line of credit.

By carefully choosing her lender, Beth was finally approved to borrow as much as $100,000 for her home repairs. She chose a loan that would let her convert to a fixed pay period after the draw period. She had the introductory rate, margin and all fees in writing before she signed on.

Choices After the Draw Period

After two years, Beth found that the full cost of repairs came to $65,000. She no longer needed the draw period on this loan, which was open for another eight years. Instead of taking chances with variable rates, she decided to refinance the loan into a fixed rate 15-year mortgage that she will try to pay off within ten years.





More About Home Equity Loans
Please sign-in with Facebook.

Home Equity Loans by State
Alabama Home Equity Loans Illinois Home Equity Loans Montana Home Equity Loans Rhode Island Home Equity Loans
Alaska Home Equity Loans Indiana Home Equity Loans Nebraska Home Equity Loans South Carolina Home Equity Loans
Arizona Home Equity Loans Iowa Home Equity Loans Nevada Home Equity Loans South Dakota Home Equity Loans
Arkansas Home Equity Loans Kansas Home Equity Loans New Hampshire Home Equity Loans Tennessee Home Equity Loans
California Home Equity Loans Kentucky Home Equity Loans New Jersey Home Equity Loans Texas Home Equity Loans
Colorado Home Equity Loans Louisiana Home Equity Loans New Mexico Home Equity Loans Utah Home Equity Loans
Connecticut Home Equity Loans Maine Home Equity Loans New York Home Equity Loans Vermont Home Equity Loans
Delaware Home Equity Loans Maryland Home Equity Loans North Carolina Home Equity Loans Virginia Home Equity Loans
District of Columbia Home Equity Loans Massachusetts Home Equity Loans North Dakota Home Equity Loans Washington Home Equity Loans
Florida Home Equity Loans Michigan Home Equity Loans Ohio Home Equity Loans West Virginia Home Equity Loans
Georgia Home Equity Loans Minnesota Home Equity Loans Oklahoma Home Equity Loans Wisconsin Home Equity Loans
Hawaii Home Equity Loans Mississippi Home Equity Loans Oregon Home Equity Loans Wyoming Home Equity Loans
Idaho Home Equity Loans Missouri Home Equity Loans Pennsylvania Home Equity Loans