| Add
Home Equity Loans Wizard to your Favorites
Watch out for Bad Terms
As with any contract, there are terms that you should be aware
of. Some of these terms you should run from completely. If
you are not careful, you might be charged ridiculous fees
or suffer interest rate hikes for late payments. Here are
a few choice terms to look out for:
Interest Rate Increase
With the competitiveness in the home equity loan market today,
there is no reason to settle for bad terms. If a lender contract
states that a missed payment will trigger a rate increase
for the life of the loan, you should go elsewhere. Believe
it or not, some low-class lenders use this clause; so you
should be mindful.
Pre-payment Penalties
This kind of provision, some might consider to be
ridiculous. A pre-paid penalty is incurred when a loan is
paid off before its scheduled pay-off date. One might wonder
why this provision exist in some contracts. This is because
some lenders will only make money off the interest accumulated
over time. So, to have a loan paid off early cuts into their
calculated earnings.
You should try to have this provision removed from your loan
contract. If the mortgage lender agrees to this, they might
attempt to raise the interest rate to compensate for the potential
loss. If they do not increase the interest rate, there is
a possibility your closing cost will increase.
If you have a choice between the two, it is best to go with
an increased closing cost because it is a one time fee. Higher
interest rates will usually accumulate over time. The standard
pre-payment penalty is somewhere around 10%, but it may differ
in each case.
Also, be aware that selling your house early or refinancing
can both be considered pre-payment of a loan. If you will
possibly be moving during the term of your loan, the provision
should definitely be removed from your loan contract. In general,
reputable lenders will not try to impose a pre-payment penalty
at all.
Insurance
Insurance on your loan pays off the loan in the event that
a you are unable to do so. This coverage only protects you
in specific cases such as death or dismemberment. This is
an optional plan and it should be carefully considered before
it is accepted.
Keep in mind that the cost of a life insurance or alternative
coverage could work out to be a cheaper solution. If you do
decide to keep the credit insurance option, be sure you understand
what is covered.
Home
Loan Resources Index
Back
to Home Equity Loans Application
|
