Fixed Rate Home Equity Loan

May 30, 2011 |

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Fixed Rate Home Equity Loan

A fixed rate home equity loan functions like its name. Your rate is fixed, not unlike your fixed rate home mortgage, if you have one. People gain equity when they purchase a home. This is the ownership they are gaining as the house increases in value and they make the payments. Both work together to give you a stake in your home.

A fixed rate home equity loan should not be taken out on your home, unless you really need the money. You could lose your job and now you have both a mortgage and fixed rate home equity loan to pay back. This is a recipe for disaster that could lead to foreclosure. A fixed rate home equity loan should only be taken out to do emergency repairs to your home, or to yourself, if you or a family member takes ill. It is not wise to use a fixed rate home equity loan for any other reason.

You may borrow up to 85% of the equity in your home, for whatever reason, with a fixed rate home equity loan, though to repeat, make sure it is for something very important. Be certain, if you decide on a fixed rate home equity loan that your interest rate is competitive This means doing some homework and shopping around. If you can, have an attorney quickly look over the terms of the loan, one never knows nowadays, what is hidden in the fine print.

The fixed rate home equity loan is preferable to the line of credit loan, in that you know what your monthly payments will always be. Not so for the line of credit home equity loan. This loan has a variable rate and there is always the chance you can be squeezed for cash. A fixed rate home equity loan is a tool to be used sparingly.