Correctly Interpreting What Your Equity Mortgage Lender Says

Equity mortgage lenders can offer homeowners a line of credit that can be used to pay off debts, finance home improvements, and more. Before you take out this line of credit, you should make absolutely sure you understand what your equity mortgage lender says.

What They Won’t Say

Equity mortgage lenders won’t ask you why you’re taking out an equity mortgage, so it’s up to you to be sure that you’re taking on this loan for a good reason. Should you default on the loan, you could lose your home.

Question 1 – Can I See a Paycheck Stub?

What the lender is actually saying is, “Can you prove your ability to pay back this loan?” Equity mortgage lenders will determine this by looking at:

  • your paycheck stub
  • your credit score
Question 2 – Why Did You Make Late Payments?

Mortgage lenders will look at your credit history and may see some history of late payments on previous loans or credit card debts. This does not mean you will categorically be denied a line of equity; explain why you missed any payments and you may still be eligible for a higher-interest line of credit.

Question 3 – Do You Want a Fixed or an Adjustable Rate?

Adjustable rates fluctuate based on Wall Street; fixed rate loans can be good if you can lock in a low interest rate. However, you should ask what kind of penalties you would occur should you pay off the loan before the loan term ends.


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