Sunday, 12 June 2016

Home equity loans face new risk

If you’re looking for the best home equity loan rates, you’re in good company. Home equity loans hold undeniable appeal for many homeowners. They’re a convenient way to unlock some cash by tapping the value built up in your home — money you otherwise won’t see unless you sell your home for a profit.
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Though you can use a home equity loan for almost anything, they’re especially appropriate for home improvements. Many others use home equity loans to consolidate their debts.

But before you run to your bank and ask about the best home loans, you’ll want to make sure you understand how these loans work, their pros and cons, and whether you’re better off with a fixed-rate loan or a home equity line of credit (HELOC). We’ll also discuss shopping tips, including what to watch for with fees and how to make sure you’ll get the best rates.

How to Understand Home Equity Rates

The best home equity loan rates are constantly changing, so your first step is to find an easy way to search competitive rates in your area.

An online search tool like Lending Tree is a great place to start. Once you answer a few simple questions such as what your home is worth, what you owe on your mortgage, and how much you’d like to borrow, you can easily and directly compare several lenders’ offers and choose the best home equity loans for you. With a few options and clear expectations of what your loan will cost, it’s easier to make comparisons.

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"Furthermore, many homeowners with HELOCs who have positive equity likely already refinanced to mitigate the payment shock from a resetting HELOC — an option not readily available for homeowners still underwater," he added in the report.

Fifty-six percent of the 3.3 million Home Equity Lines of Credit potentially resetting with higher, fully amortizing monthly payments from 2015 to 2018 are on properties that are seriously underwater, meaning the combined loan to value ratio of all outstanding loans secured by the property is 125 percent or higher, according to the report.

States with the most HELOC resets are California, Florida, Illinois, Texas and New Jersey – states where foreclosure rates were and still are above the national average.

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