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How to maximize your home equity loan as rates rise

Check if you pre-qualify and then compare lenders to secure the best home equity rate.

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Even if interest rates rise, Homeowners today The form continues to tap into their home equity for extra cash Home equity loan or Home Equity Lines of Credit (HELOCs).

There are a few reasons why borrowing against your home equity can be a good option right now — and not just that Home standards are high (Although they are starting to decline Some parts of the country) but home equity loan options usually carry Low interest rates Compared to other types of loans or credit since the money is secured by your home.

If you think home equity might be a good option for financing your next renovation or as a means Existing debt consolidation, this can help ensure you’re taking advantage as much as possible when rates are high. Below, we’ll walk through three ways to do this.

Start by comparing home equity rates you may qualify for now.

How to maximize your home equity loan as rates rise

Here are three ways you can make the most of your home equity even as interest rates rise:

Get the best rates

One clear way to combat the impact of an APR increase is to make sure you qualify for the lowest rate possible.

Today, you may be able to get Home equity rates As low as 8% APR depends on many factors. While there are some things you can’t change, like what market your home is in, there are parts of your loan application that you do have control over.

Perhaps the most important is yours Credit score. Before you apply for a home equity loan or HELOC, familiarize yourself with the details of your credit score and your credit report. Make sure there are no delinquencies that could negatively affect your score, and be careful not to open any credit cards shortly before applying for your home equity loan (as this can have a temporary effect on your score).

Another way to guarantee you get the lowest rate possible is to shop around. Consider checking with a few different lenders to see what rates and loan amounts you pre-qualify for—then use them. Compare different options And find the right one for you.

Get started by exploring today’s top home equity rates here

Budget for your monthly payments

If you fall behind on your home equity loan payments, you risk losing your home — since The loan is secured By the value of your home. Not to mention the additional debt you can take out from the penalty.

An important way to maximize the value of your loan in any rate environment, but especially when rates are high, is to make sure you can cover your monthly payments before applying.

“As with any loan, don’t sign the papers before you have a solid game plan for how it will be paid back,” says Charles H. Thomas III, CFP, founder and president of Intrepid Eagle Finance. “For example, if your loan means new monthly payments, make sure it’s something your ongoing budget will support.”

The current rate environment can also play a role in whether you’re better off choosing one Variable or fixed interest rate loans.

If you believe interest rates will remain high, you may be better off choosing a fixed-rate home equity loan — so you can lock in today’s rates before they rise again. However, if you think the rate may drop over the life of your loan, you may want to take a chance Variable rate HELOCs. This can result in lower payments over time. But you should also consider any potential monthly payment fluctuations in your budget if you choose this option.

Pay off your loan early

Once you know you can meet your monthly payments, try to pay more toward your loan so you can lower the overall amount of interest you pay, regardless of your actual APR.

“Using a home equity loan or HELOC is very expensive because interest rates are so high,” says Brandon Amaral, CFP, founder of Amaral Financial Planning. “These types of loans are best used for short term if they can be repaid within a few years.”

If you pay off your loan early, you prevent your principal balance from accruing as much interest as it would otherwise. Just check the terms of your loan agreement before doing so. Although it is not common, some lenders may apply a penalty for early repayment.

Bottom line

Despite the high interest rates, a home equity loan or line of credit can be a good way for homeowners to use up some extra funds. home project, debt consolidation or other financial goals. Plus, even if rates are higher than a few months ago, borrowing from your home equity can still be less expensive than higher-rate options like personal loans and credit cards.

Make your most Home equity loan or HELOC Shop around to guarantee your best rate, budget for your monthly payments, and plan to pay off the amount you owe each month and pay off the balance early.

Considering a home equity loan or HELOC today? Start by comparing the best rates in your area.

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