Negotiating
Steps for Best Rate:
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through
our financial network. Allow our network of home equity lenders
compete for your business
start
by selecting your
state:
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(FREE
download)
to shop best
rate and terms among the
lenders that have reviewed
your application
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with other published rates
(newspaper, internet, branch
network, etc.)
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to match or beat any rate
that you feel you deserve
that's the negotiating
power of the saylending
financial network
Please Note:
We don't list rates since YourEquity.com
is not a lender. We manage a network
of lenders that compete for your
home equity loan or line of credit.
Note that rates often change and
may not be the actual rate when
you finalize your application.
Your actual rate may be different
due to loan request amount, LTV
position, credit score, and other
factors as banks compete for your
business.
Rates may differ among lenders
and can change depending on several
factors, namely:
your LTV position
the amount you
intend to borrow
your credit
history rating
your local
market
other
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Banks and other lenders will extend
you credit based upon a percentage
of the estimated market value of
your home.
That percentage of market value minus the amount you owe
on your first mortgage (plus any
2nd or 3rd mortgages that you may
have) becomes the maximum amount
of credit that lenders will give
you.
Let's say that your home has an
estimated market value of $150,000.
The amount that you still owe on
your first mortgage and any other
liens is $100,000. The maximum amount
you can borrow is calculated as
follows:
| Estimated
Market Value: |
$150,000 |
$150,000 |
| Percentage
LTV: |
70% |
80% |
| Percentage
of Market Value: |
$105,000 |
$120,000 |
| Less
Mortgage Debt: |
$100,000 |
$100,000 |
| Equals
Total Equity: |
$5,000 |
$20,000 |
| Estimated
Market Value: |
$150,000 |
$150,000 |
| Percentage
LTV: |
90% |
100% |
| Percentage
of Market Value: |
$135,000 |
$150,000 |
| Less
Mortgage Debt: |
$100,000 |
$100,000 |
| Equals
Total Equity: |
$35,000 |
$50,000 |
Banks and other lenders generally
charge a higher rate of interest
for higher percentages of LTV. That
is why you will find in the market
quoted rates of PRIME + 0% for LTV
percentages of 80% or lower.
Calculate
your own LTV borrowing amount.
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Many lenders use "Tiered Pricing"
for their home equity lines and
loans. This means they will offer
different rates at different levels
of borrowing.
The terms often used when quoting
rates are points and basis points.
A "point" equals 1%. Basis
points equals 1/100 of 1%.
For example, if you hear something
like:
"... if you borrow 80%
of your total approved balance,
we will reduce your rate by 25
basis points".
25 basis points equals one-quarter
of a point (25/100). They will reduce
your rate by one-quarter of a point
if you borrow 80% or more of your
approved balance.
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Lending institutions review the
following information from your
credit history report to determine
your creditworthiness:
- your current outstanding debt
- places and the number of times
you have applied for credit
- the kind of credit you have
taken out in the past
- late payments
- over extension of your credit
lines
- liens
- garnishments
- bankruptcy
The report lists any payment delinquencies
that you may have had over the past
three years. You need a credit history
of at least one year to ensure a
good credit report. The report can
be a factor in a lending institution's
decision to approve or decline your
home equity application.
You should review your credit report
for any errors before applying for
loan. Link to our parent site www.SayPlanning.com
for the following credit report
information:
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Rates can vary by region, due to
competition and money supply/demand.
If lending institutions in one
region find a very competitive market
for home equity products, they may
offer lower rates than published
national rates.
Likewise, if lenders in certain
markets have a tight supply of money,
their rates may be higher than published
rates.
Most lenders charge the same rate
across all their channels. Rates
posted on a bank's web site is generally
the rate you will find if you walk
into a branch or telephone a call
center, but not always.
They
know that consumers have access
to rate information from lending
institutions from across the country.
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Other rate-determining factors
are market conditions and competition.
If lenders need to build their portfolio
of loans, or if they need to move
into a new market, they may offer
really attractive rates to build
their loan portfolio.
Many lenders offer "teaser
or introductory rates". These
are lower-than normal rates for
a period of time to "entice"
consumers to close their loan application
with them. But after a certain length
of time, usually from 6-12 months,
the "introductory rate"
reverses back to the normal rate.
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Most lenders use the PRIME RATE
as a index when calculating home equity
line of credit rates.
They will then add a margin to the
index to come up with the rate that
they will charge for your home equity
product.
PRIME + 0.00%
This quoted rate means that the lender
will charge you the index (PRIME RATE)
plus a margin of 0.00%.
Your interest rate will then be: The PRIME RATE at 5.00%
If you see this rate quote:
PRIME + 1.5%
The lender will charge you the index
(PRIME RATE) plus a margin of 1.50%.
Your interest rate will then be: 6.50%.
If you see the rate quote:
PRIME - 0.5%
The lender will charge you the index
(PRIME RATE) minus a margin of 0.50%.
Your interest rate will then be: 4.50%.
Since rates for home equity lines
fluctuate — meaning that whenever
the PRIME RATE increases or decreases
— your interest rate will likewise
go up or down along with the PRIME
RATE.
For example, if the PRIME RATE increases
one-quarter point, each of the interest
rates quoted above will increase by
exactly one-quarter point.
Likewise, if the PRIME RATE decreases
by one-quarter point, your new interest
rate will decrease by the same amount.
Rates can vary by institution. Some
lenders charge a low rate but may
impose annual fees and other usage
fees. It is important that you "read
the fine print" before selecting
a home equity product based on rate
only.
Some lender charge tiered rates,
which means the more you borrow that
lower your rate.
If you come across lenders who use
a different index other than PRIME
RATE, request to see a historical
trend of their rate increases and
decreases. Compare this to the historical
trends of the PRIME RATE.
- have a strong credit rating history
- have an LTV position of 80% or
less
- request a large loan amount
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Banks use several factors to calculate
the fixed rate on home equity loans.
Two key factors include:
- the lender's cost of funds
- the lender's cost of capital
Allow us to use this simple illustration
on the "cost of funds".
Banks collect and manage money deposits
like checking and savings. There is
a cost associated with collecting
and safeguarding deposits, which include
the interest rate consumers collect
on their accounts, safekeeping, and
other insurance and maintenance fees.
Banks don't let these deposits sit
idle. They take these deposits and
lend it out in loans and other advances.
When banks turn that money into loans,
there is a "cost of funds"
associated with the use of that money.
Banks are in the business of making
money. So they will take the "cost
of funds" and other related maintenance
and servicing expenses and add a margin
as profit. This adds up to the interest
rates they are charging for fixed-rate
home equity loans.
Of course, there are more sophisticated
models that go into the loan rate
that include the "cost of capital".
But that is beyond our scope.
Just note that when the "cost
of funds" go down, lenders pass
on the decrease in lower home equity
loan rates. Likewise, when the "cost
of funds" increase, you will
find an increase in home equity loan
rates.
Home equity loans are generally FIXED
rates, meaning the rate and payment
will remain the same during of the
life the loan.
Fixed rates for home equity loans
can vary by your LTV position, the
amount you borrow, and your credit
history rating.
If you are strong in each of these
areas, you can expect an attractive
FIXED rate offer from a lender competing
for your business.
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