Before you apply for a home equity loan, first decide if a fixed-rate home equity loan (HEL) or a variable-rate home equity line of credit (HELOC) will better suit your needs. While a home equity loan offers you a fixed interest rate for a set amount to be repaid over a specified period of time, a home equity line of credit is more flexible - you can borrow what you need up to your approved credit amount at a variable rate that can adjust.
Loan Application Questions
Since both are secured by the collateral in your home, there are specific questions you will want answered before you apply:
| Annual Percentage Rate (APR) | Is the rate fixed or variable? What is the actual APR once the introductory period ends, if any? How often can the rate adjust?
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| Cap | What is the maximum rate amount your loan can increase annually? During its lifetime? |
| Closing costs | How much do fees and other closing costs add to the Annual Percentage Rate (APR)? What are my out-of-pocket costs? |
| Conversion | Does your adjustable loan allow you to convert to a fixed rate? If so, how many conversions are allowed and is there a conversion fee? |
| Draw period | How long will the money be available to use?
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| Fees | Are any of the fees due upfront, refundable, or built into the costs of the loan? |
| Index | What is the index used to calculate your HELOC rate and how often does it change? |
| Margin | How many percentage points are added to the index to determine your adjustable HELOC rate? |
| Pre-payment penalty | Are there any fees to pay my loan off early? |
| Relationship Banking Benefits | Are there any benefits if I have my checking, savings, and home equity loan accounts at the same institution? |
| Repayment period
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Is there a balloon payment due at the end of the loan period, or do I have an additional period of time to repay the loan?
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| Transaction fee | Is there a transaction fee for accessing your HELOC? |
| Withdrawal amount | Is there a minimum amount you have to withdraw each time you access your HELOC?
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Make sure to speak with a loan officer should you have other questions regarding loan terms and rates. Compare home equity rates.
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