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?
|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?
|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?|
|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?
|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?
Make sure to speak with a loan officer should you have other questions regarding loan terms and rates. Compare home equity rates.