| Lenders consider a number of factors in determining a | | | | home equity loan rate if you accept a shorter |
| home equity loan rate. In order to know what rate you | | | | repayment term. This is not always the case, but |
| may be expected to pay, you will need to have an | | | | some lenders do offer it as an incentive to encourage |
| idea what factors the lender might consider in | | | | you to pay the loan off sooner. If you accept a shorter |
| determining the rate for your home equity loan. This | | | | payment term, you have the added advantage of |
| rate varies not only among lenders, but if quite often | | | | paying less interest over the term of the loan, an |
| different among customers. | | | | incentive in itself, especially if you are not in a position |
| Credit history | | | | to claim the interest as a deduction in tax liability. |
| One of the most important factors a lender will use to | | | | Financial stability |
| determine the home equity loan rate for an individual | | | | The biggest factor that will affect your home equity |
| customer is credit history. A negative credit history or | | | | loan rate is financial stability as an entirety. This means |
| insufficient credit history can mean paying a higher | | | | employment history, credit history, equity in your home, |
| interest rate than someone who has sufficient good | | | | income to loan ratio, and total assets. Some of these |
| trades on his credit history. Of course, poor credit will | | | | factors will be weighed individually, but they will also be |
| likely not prevent you from acquiring a home equity | | | | weighed as part of your overall financial stability. Like |
| loan since it is fully secured, but it will most definitely | | | | any loan, certain factors are weighed individually, and |
| have an effect on the interest rate you will pay. | | | | then combined with other factors to come up with an |
| Ratio of loan to appraised value | | | | overall picture of the risk factors in granting the loan. |
| Another factor that may have a detrimental effect on | | | | Age and condition of the residence |
| the percentage rate is the ratio of loan amount to | | | | In the majority of cases, a lender will charge a higher |
| appraised value. The higher that ratio is, the higher your | | | | interest rate for a residence that is quite old or in |
| home equity loan rate will be. In other words, borrowing | | | | severe disrepair. It is difficult sometimes to draw the |
| 70% of your equity will cost you less in interest than | | | | fine line between what is disrepair that can be repaired |
| borrowing 90%. This may not hold true with all lenders, | | | | with a home equity loan and what is severe enough to |
| but many lenders do tie interest rates on a home | | | | require a rehabilitation loan to bring the residence into |
| equity loan to the percentage of equity that is | | | | top-notch condition. In either case, the interest rate is |
| borrowed. | | | | going to be higher because the life of the home is |
| Repayment term | | | | shortened due to either age or disrepair. |
| In some cases, a lender will offer a more favourable | | | | |