Choosing the Right Home Equity Bank

Electing the right home equity bank will help you get the lowest interest rates and the best loan options. It is preferable to work with a lender you have a good relationship with, where possible. However, there are some strategies that pose options to individuals looking for alternative lending arrangements.

Using Your Mortgage Lender

One option is to approach the lender that currently holds your mortgage. You may find your mortgage company offers a home equity line of credit to all borrowers with loans in good standing. This encourages you to elect to have both loans in one place, which bodes well for the lender. They double their profits from interest. This also prevents a situation where your home equity loan would go into default with another lender while your mortgage is still active with them, which can lead to unfavorable and complicated results. When you use your current mortgage lender for this option, you will find competitive interest rates and ease of application.

Using Your Savings Account Holder

You can monetize the assets you are already holding with a bank in order to secure a competitive home equity loan. Some banks will offer key advantages to people who hold savings accounts or CDs with them. This provides additional leverage and collateral in order to secure the loan, making it far less risky for the bank. They will also be able to easily garnish you accounts if borrower do not make payments on the home equity line, which is favorable for the lender. This option will additionally present you with competitive interest rates and ease of application. You will be assuming additional personal risk in this case, however.

Online and Alternative Lenders

Alternative lenders often are the best option for those borrowers who cannot achieve traditional loans. If you do not have much equity saved up in your current property, have a bad credit score, or have a low income, you may need to seek alternative options. These lenders include high risk lenders and some credit card companies. Most can be located online and offer lines of credit to any homeowner with a mortgage in good standing. Alternative lenders tend to charge much higher interest rates. However, the loan options tend to be more flexible and more widely available. You should note that, just because a loan is from an alternative source, it has no smaller claim on your home title. Any home equity loan will be using your home as a legal form of collateral.

Comparing Loans

Based on the advantages very briefly compared above, you may already be leaning toward one loan option. In most cases, a home owner has to decide his or her priorities, and choose a loan that matches those. If low rates are the highest priority, then you should aim for a loan with your existing mortgage company. If you are looking for a more flexible option with potentially higher limits, then a bank may be best. If you cannot secure a traditional loan and are comfortable taking on aggregated risk, an alternative lender may be the right choice for you.

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