Factors That May Affect Equity Loan Rates

2007-03-08 10:33:40

( Financial )



There are a lot of factors that can affect equity loan rates. Regardless if you are concerned about the refinance mortgage rates or your credit card rates, it will not always depend on the product you wish to purchase. It does not only depend on your age and your credit history. When buying property or even taking out a loan against your home, there are a lot of factors that are being considered by the lending institution. For you to be able to secure a lower rate, you have to understand how it works.

First, your credit and payment history is a big factor that determines most of the interest rates offered to you including equity loan rates. Paying your mortgage or rent on time is very important. Making a late payment by more than a month even just once greatly affects the rates you will get. Late payments on credit cards and utility bills can also affect the interest rates offered to you.

Banks also check your monthly debt obligations in relation to your income. This is often referred to debt-to-income ratio. Often, the higher your debt-to-income ratio is, the higher the equity loan rates will be. The reverse is true for loan amount versus your property’s value. The higher the value of your property is, the lesser the risk therefore the lower the interest rate.

Another factor that determines your interest rates is the property type. Interest rates are typically lower for single-family homes rather than multi-family or commercial properties. Interest rates are also affected if you are going to live full-time in the property. Higher interest rates usually go with vacation homes and property investors. The loan amount also determines the interest rates. Most lending institutions offer discounted interest rates if you borrow a large amount of money.


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