How to Negotiate Fixed Home Equity Loans

Negotiating a fixed home equity loan can be done with the appropriate knowledge and tools. You will need to understand your budget, be willing to conduct some independent research, learn the necessary terms and working with the appropriate professionals.

Your Budget

When negotiating a rate for your home equity loan, you will need to figure your budget to determine how much money you will need. You can do this by taking the appraised value of your home, then multiplying it by a certain percentage, and subtracting the balance of what you owe on your mortgage. You can find calculators online that provide different home equity calculators so that you can get a better sense of your borrowing needs.

Independent Research

Researching the different fixed loan rates available is extremely important in helping you to determine your negotiation powers. Find out what the average rates are in your state, because each state is different. Looking up your credit score and figuring out your debt to income ratio are also vital pieces of information.

When you speak with a lender, whether it is a bank or mortgage broker, they will be able to access this information for you in order to determine how low or high your interest rates will be on the home equity loan. The ideal circumstance is a high credit rating with a low debt to income ratio.

Necessary Terms

Once your research is done, you will need to read up on some common terms used throughout this process. These terms consist of application fees, annual membership fees, transaction fees, annual percentage rate (APR), cap, closing costs, minimum payment, credit limit, equity and variable rates. Knowledge of these terms will help you to understand necessary documents you may be required to sign and all of the different factors involved in the negotiation. You can ask your bank to define these terms for you or you can look them up online.

Fixed Loan vs. Variable Loan

It is essential to know the difference between a variable and fixed loan. The advantage of having a fixed home equity loan is that you will have a set monthly payment that does not change. If you choose a variable loan, your payment may change based on many factors, one being the economy.

A fixed loan will allow you more budgeting power with less stress wondering whether or not your payment will be different next month. Typically the best loan options are those with low interest rates, little down payment and a longer term of repayment.

Appropriate Professionals

Working with professionals that conduct this form of business on a daily basis would consist of banks and mortgage brokers. In order to best advocate for yourself, it is suggested you utilize the research you conducted and speak with several different institutions to see what they are offering. Compare interest rates, length of loan repayment and different fees involved.

Once you have determined what your budget allows, research your credit scores, learn the necessary terms and determined you would like a fixed loan.

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