You have decided to refinance your home loan by taking up a home equity loan. This second mortgage could mean you are taking up a loan for a sum of money enough to settle your original mortgage and still have some leftover cash for you to settle your bills, pay for college tuition or pay for home repair. You will be cashing out on the equity of your home which makes it a secured loan and the interest payable is also tax deductible. There are now many loan products being offered by various financial institutions and banks. So, it can be pretty confusing and hard to choose one organization to apply for a loan.

Here are some tips on how you can choose the bank or financial institution to apply for the loan:

– Look at your own credit rating and financial circumstances first – do you have a poor credit rating? If so, you may need to look for a lender with specialized loan programs for those with bad credit. Or do you need to borrow only a small sum of money and want a shorter repayment term? Again, you need to look for a lender that offers loan programs that suit your situation. The secret here is to search for a lender with plenty of experience in situations similar to yours so that it could match your needs.

● The lender reputation is important – it does not matter if you are taking a second mortgage or a home equity loan line of credit (HELOC), the reputation of the lender is probably the most important piece of information you need to get. You want to get a highly reputable lender as compared to one that is of bad repute. Do remember, the loan you are taking up is a long term one which could stretch up to 20 to 30 years so you do not want to be stuck with a lender of ill repute. The best way to check on the reputation of any lender is to listen to word of mouth. You can even do an online search and check what others are saying about a particular lender.

● There are many types of loans you can consider – a fixed rate mortgage is not the only loan you can take. There is a wide range of loan types in the market that you can check out and consider. So, rather than be too fixated on trying to get a fixed rate second mortgage, why not look at the different types of loan available. There is the adjustable rate mortgage (ARM) or a hybrid ARM or even option ARMs. You should be able to find a loan package that suits your financial situation and needs.

● Compare interest rates and fees – even a mere 2% difference in interest rates could mean a lot of difference in your monthly repayment. So, do shop around for a lender offering the lowest interest rate. That’s not all, you should also check on the fees chargeable and make sure the lender you chose has very reasonable fees. To get an accurate estimation of the total costs to take up a loan with a lender, ask them for a good faith estimate of all the fees you may need to pay and also about any other hidden charges not listed in the estimate.

● An excellent level of customer service is best – that’s because you will be their customer for more than a decade, possibly two or three decades. So, you will want excellent customer service to help you with additional home equity loan information or to provide you with after-sales service. To test the lender’s level of customer service, check how honest and upfront they can be when it comes to the total costs your loan could incur. Also ask the lender about their policy and see how willing they are to agree to some of your demands like amending the loan terms. You will want a flexible and responsive lender that will listen to you and try to meet your requirements and needs. If the lender is unable to meet your demands or even try to do so, then you should look elsewhere.

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Category: Finances
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