Best Home Equity Loan Rates
- You can take a fixed rate or variable rate Home Equity Loan.
- An excellent credit score and loan-to-value ratio (LTV) under 80% helps you get the best rates.
- Mortgage rates are constantly changing. Shop around for today’s rates.
Three Steps to get Best Home Equity Loan Rates
Do you remember when you took your first mortgage? Learning the mortgage lingo, comparing fixed rates mortgages to adjustable rate mortgages, and trying to figure out what kinds of fees exist.
Now that you are homeowner you are going to find it easier to shop for a home equity loan and find the best rates. Here are three steps to get the best Home Equity Loan Rates.
Improve Your Credit Score
It comes as no surprise that lenders give better home equity loan rates to borrowers with excellent credit. Lenders classify borrowers into credit categories. If you can improve your credit score enough to reach the next tier you can save money.
Since most home equity loans are not government-backed mortgages banks have more flexibility in setting their underwriting rules. For example, a conventional loan must have a FICO score of at least 620, whereas an FHA loan can be as low as 500 (or 580 if the LTV is over 90%).
Do all lenders use the same credit ranges? While there are similarities between lenders, each lender might have a different range. Lenders do not always advertise rates for all credit scores and you can assume that advertised rates are for the top tier credit scores.
Here are sample Interest Rates from US Bank for April 18, 2019. They offer best rates, with a 0.5% discount, if you set up an automatic payment from a new or existing U.S. Bank personal checking account.
US Bank Sample Home Equity Loan Rates
| 30-years | 15-years | 10-years | |
|---|---|---|---|
| Excellent: 780+ | 7.19% | 6.39% | 6.04% |
| Very Good: 730-779 | 7.44% | 6.64% | 6.29% |
| Good: 680-729 | 7.69% | 6.89% | 6.54% |
| Fair: Below 680 | 8.19% | 7.39% | 7.04% |
source: https://www.usbank.com/home-loans/home-equity/home-equity-loan.html
Lower Your Repayment Period
The second way to get the best home equity loan rates is to lower your repayment period. Just like a regular mortgage, your repayment period affects your interest rate. Home Equity Loans are offered between 5 - 30 years. If you need a low monthly payment, then stretch out your payment schedule to the maximum; however, your interest rate will be higher and your total interest payments also increase.
US Bank Sample Home Equity Loan Rates
Shop Around for the Best Home Equity Loan Rates
Just like any other mortgage you need to shop around to find the best rates.
You might consider speaking to your current mortgage lender and see if they offer home equity loans. Check to see if the lender has special discount rates. Sometimes, local credit unions are a good source of home equity products. Also, check with the bank with whom you do your normal banking. That bank may offer loans to its customers that are not available to non-customers.
But, do all banks offer a Home Equity Loan? You might be surprised, but not all lenders provide home equity loans. For example, the Bank of America and Wells Fargo, two of the largest mortgage banks, only offer a HELOC. If you aren't sure which home equity loan product is most appropriate check-out Bills.com's Home Equity Loan Comparison Calculator.
One of the most popular methods to shop for the best rates is through online shopping. You can either use an online mortgage form or search for a lender who offers a Home Equity Loan. Since HELs are generally for smaller sums of money, the interest rates are higher than a purchase or refinance mortgage. However, expect to pay fewer fees.