| Home equity interest rates can be confusing for some | | | | different loans, make sure that the terms and |
| people. In fact, if the wrong type of loan is taken out, | | | | conditions of the loans are the same. Differences in |
| homeowners can easily find themselves in financial | | | | the terms and conditions will affect the APR. As an |
| trouble. With the current housing market mess, it is | | | | example, if one of the loans that you are looking at |
| wise to understand how these interest rates work and | | | | has a longer payment term, a balloon payment, and |
| how much they will cost you during the life of your | | | | some type of pre-payment penalty, it is not meaningful |
| loan. | | | | to compare its APR to another home equity loan that |
| The good news is that interest rates are a very helpful | | | | does not have those conditions. |
| tool when homeowners are shopping for home equity | | | | Another confusing aspect of home equity loans is the |
| loans. Of the many terms that are associated with | | | | difference between home equity loans and lines of |
| home equity loans, APR is one of the most important. | | | | credit. Consumers will do well to compare APR's on |
| APR stands for Annual Percentage Rate. | | | | home equity loans, but they should understand that |
| It should be understood that you cannot compare the | | | | they cannot compare this to lines of credit loans. This |
| APR between a home equity line of credit and a | | | | is because the annual percentage rate for a home |
| home equity loan. These are two different types of | | | | equity loan takes into account the interest rate and all |
| loans and they behave differently. | | | | fees paid within the loan, while the APR for a home |
| Homeowners should also understand that an | | | | equity line of credit only takes into account the interest |
| introductory rate is often used by lenders to get new | | | | rate. In other words, the fees in a line of credit are not |
| business. If your loan has an introductory rate make | | | | factored into the APR. To avoid confusion, consumers |
| sure you understand what the true rate will be once | | | | should only compare like to like; the APR of a home |
| the first phase or introductory phase is over. | | | | equity credit line loan should only be compared to the |
| There is a difference between the standard interest | | | | APR of another home equity line of credit that |
| rate and the annual percentage rate. The interest rate | | | | contains similar terms. |
| for home equity loans does not correctly tell you the | | | | As mentioned above, home equity lines of credit may |
| true cost of the loan because it does not account for | | | | offer an introductory interest rate to get your attention. |
| added costs such as points and fees. The APR is far | | | | These introductory rates are also called discounted |
| more helpful when you are comparing two home | | | | rates or teaser rates. It is important to know in |
| equity loans because it accurately reflects the cost of | | | | advance how long the rate will apply and how much |
| credit expressed as a yearly rate. It will also include the | | | | additional interest you will have to pay once it is over. In |
| interest rate and all fees and points that must be paid. | | | | some cases, the added interest can be significant, in |
| When you are trying to compare APR's between | | | | which case you may want to continue shopping. |