What You Must Know About a Home Equity Loan

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It is important to understand that you can obtain a better deal on a home equity loan through negotiation. A home equity loan is a product just like a car and the price is negotiable. Lenders and brokers may offer different prices for the same home equity loan terms to different consumers, even if those consumers have the same loan qualifications. The most likely reason for this difference in price is that loan officers and brokers are often allowed to keep some or all of this difference as extra compensation.

Generally, the difference between the lowest available price for a loan product and any higher price that the borrower agrees to pay is an overage. When overages occur, they are built into the prices quoted to consumers. They can occur in both fixed and variable-rate home equity loans and can be in the form of points, fees, or the interest rate. The quoted price of a home equity loan may contain overages.

When you have received a loan offer, ask the lender for at least one of the following: 1) lower the interest rate, 2) waive or reduce one or more of its fees, 3) lower points. Make sure that the lender is not agreeing to lower one fee while raising another or to lower the rate while raising points. There is nothing to be lost by asking lenders to give better terms than the original ones offered.

There is heavy competition among lenders in the home equity loan market and you need to use this in your favor to find lenders who are willing to give you the best deal possible. Comparison shop and negotiate with more than one lender. Let lenders know that you are comparison shopping to ensure that they give you their best deal. At the very worst, comparison shopping may give you three similar offers from three lenders. This should at least give you comfort in knowing that you were not being taken by one unscrupulous lender who is trying to take you and your home for a ride.