Home Equity Rate

Home Equity Rate - Math Action

To truly understand your home equity loan rates you should look at them in a state of action. Find out what you want to do with your home equity and see how much your loans will cost - see how you can adjust the costs and where your rates will remain absolutely fixed. Get your quotes and put them all into a mortgage calculator - see what your home equity rate will actually mean for you now and for the life of your loan.

An example of home equity loan rate change

Points - you are going to hear a lot about points when you shop around the Internet and look for the most competitive home equity rate. Basically, points are just payments to the lender or broker for their lowering the rate of your home equity loan, you pay more now to pay less later. But you have to be able to afford these points in the first place, and you might even stand in a much better position if you take the higher home equity rate without paying points:

• Lets say you are quoted a 7% home equity rate on a $30,000 equity loan with a term of 15 years.
• Use a mortgage calculator: you'll pay $269.65 a month for the next 15 years to pay off that debt.
• Now imagine your lender offers you the chance to buy 2 points and lowers your rate to 6.5%. In most instances a point is defined as 1% of the mortgage amount - or in this case $300. So you'll pay an initial $600 and in return you'll only pay $261.33 a month. Thats only an $8 monthly savings, but over 15 years you will save $1496.93 on interest, or almost $900 overall!

Now, this might now seem like a lot of cash in the overall scheme of things, but its a good example of how you can manipulate your home equity loan rate and check if those manipulations will really turn out to be a financially smart idea. And remember - the best idea is not necessarily the lowest home equity rate.