You may be considering a loan to take out some of your home
equity as a means to supplement your income because of a
possible job layoff, a business slowdown, or maybe you're
anticipating an increase in your expenses that could push your
monthly budget over the limit.
To put off making a decision is a natural
response, but waiting too long to access your home equity could
result in a higher rate. The best time to get a home equity loan
is before a bad situation can create a problem. Borrowing money can be easier when
you don't really need it, and harder than when you do really
need it.
When applying for a home equity loan or a
refinance mortgage, if you can't show the lender a good source of
income to make the payments, then you could be declined, or
have to pay a higher home equity rate. If you are past the point
of being able to show sufficient income, some lenders may offer a
limited documentation program, however, that program
normally requires a substantial amount of home equity, good
credit, and will have a premium added to the mortgage rate.
A reduction in your personal income, or an
increase in expenses, could result in making late payments on
current loans. Recent late payments within the last 12 months
can make it more difficult to borrow against home equity, and cause the
rate to increase. Credit reports will show
payments as being late if they are over thirty days past the
due date. Strict guidelines apply to your recent credit
history, and late mortgage payments can be the kiss of death
for a loan application.
The appraised value of your home is another
issue that may affect your home equity rate if the combined loan
to value is greater than 80%.
A slow real estate market could lead to a decline
in the appraised value, and as the loan to value increases, the
rates can go up accordingly.
Lender Rate Quotes