Once you’ve decided that you want to open a line of credit based on the equity of your home, the next logical step is to begin comparing what different institutions will offer in the way of home equity line of credit rates. The idea is to obtain the highest line of credit while also enjoying the best interest rates possible. In order to accomplish the task, it is important to know the criteria that lenders use for granting a property line of credit, and what type of commitments you make as part of the deal.
As you begin to shop around for the best home equity line of credit rates, you’ll quickly notice that many of the qualifications required for other types of loans and credit are also necessary for a new line of credit. This means that the best offers will go to applicants who have a relatively low amout of debt while earning an equitable amount of income each month. Your credit score and current bank balances will also be considered. Making sure you are current on all existing debt obligations, your credit report is up to date and accurate, and that your income level is sufficient to cover all debt without undue stress will make you much more attractive to lenders, and increase your chances of qualifying for some of the better home equity line of credit rates.
Many applicants are not aware that home equity line of credit rates may be influenced by the actual amount of the line of credit that is opened. Typically, lenders will place a limit on that credit line that is somewhere between seventy and eighty percent of current appraised value of the property, after deducting the current balance of the current mortgage. That does not mean you have to accept the maximum line of credit offered.
Depending on the project or projects you have in mind for that credit line, it may be feasible to set a lower figure. Some lenders will see this as reducing their risk, and offer a small reduction in the interest rate. Keep in mind that regulations on interest rates vary from one country to another, which means the amount of the credit line may or may not be a factor in your country.
Make sure you read the terms and conditions carefully before committing to any property line of credit. Along with the amount of the home equity line of credit rates, take the time to determine how that rate is applied. Is it calculated on the basis of 360 days or 365 days? Depending on the amount of the credit line, this one seemingly minute detail may mean that what appears to be a good deal on the surface is in fact not the best offer you’ve received.