Questions You Should Ask About Equity Lending
Owning a home can afford you a lot more than a roof over your head. The fact that you can qualify for two home equity loans on the same property is proof that homeownership is such a huge privilege. For many people, home equity loans serve as financial backups during emergencies and challenging economic times. And while you can easily qualify for a first and even second mortgage with equity lending, there are lots of factors you’ll need to consider. Most people don’t ask enough questions when taking a home equity loan. We’ve rounded up the five must-ask questions to boost your chances of landing a good deal. Call us today to learn more!
What’s the Cost of the Loan?
Like any other loan, home equity loans come with interest on top of the principal debt. However, many borrowers consider the principle amount they qualify for, not considering the accrued interest at the end of the loan period. The next time you are making an offer for a home equity loan, be sure to ask more about the monthly interest rates and the overall cost of the loan.
What’s the Repayment Period?
This is one of the equity lending questions you should prioritize as it affects the interest rates and your monthly budget. A shorter loan comes with higher interest rates, while longer ones may cost you some fees when you overpay from your monthly budget. A typical home equity loan has a 5-to-15-year repayment period. So you want to understand the implications of choosing the extremes.
What are the Fees?
Equity lending may come with some fees, and you need to understand them before taking a loan. As stated earlier, more extended repayment periods may come with extra fees when you try to overpay the loan or settle the debt early. To be on the safer side, you want to ask the lender if there’s any fee associated with paying the loan earlier or later than initially agreed.
Does my Credit Score Matter?
Most lenders in the market require a minimum credit score of 600 if you are to qualify for equity lending, but certain exceptions exist. For instance, your current debt-to-income ratio may be high, but your credit history isn’t impressive.
Or, your home equity may be high, but you have some minor issues with your credit. Some lenders will choose to overlook your credit history in such exceptions, but this isn’t always guaranteed. So it’s best to ask this question and get the answers right.
Will the Loan Solve My Current Problems?
Last but not least, evaluate the needs you have for the money you intend to borrow with equity lending. Your home equity loan won’t probably fix all your money problems, so you want to prioritize and develop a strategy to ensure you are taking a loan you can afford to repay.
Get Help Whenever Necessary
Asking the right questions is critical to avoiding many and perhaps costly mistakes. This is especially true when you are about to make a massive commitment like taking a home equity loan. If you need a quick loan and are considering equity lending, reach out to us, and we’ll be happy to help. We’ll answer all your pressing questions and recommend the best lenders in the market based on your unique needs.