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Home Equity Loan News

[Feb 12, 2010.]


It doesn't seem like that long ago that the financial sector of the economy was under extreme pressure. It was about September of 2008 when things were at the worst point. Home loan lenders began closing or freezing their customers' home equity loans. This caused chaos for people in the middle of construction projects or otherwise dependent on the easy access to their home's equity. At a time when unemployment was growing, many people found their home equity lines of credit were not there to bridge the gap until a new job could be found. It was a dark hour for home loan borrowing.

Today, the lending climate is improving. Banks are still cautious about lending, but home equity loans are slowly returning to the marketplace. New home equity loan originations are up, though they are nowhere near the high levels of a few years ago. If you have sufficient equity in your home, you could be approved for a fast loan that gives you access to it with a convenient debit card or checks.

Home equity loans are still cheap loans, primarily because so many of them are adjustable rate mortgages tied to the prime rate. The prime rate is 3.25%, and depending on your margin, your home equity loan could be the among the cheapest loans in the marketplace. For now, expect the prime rate to stay low. The Federal Reserve has said repeatedly that interest rates should stay low for an "extended period." But if economic circumstances change, the prime rate may increase.

If you have had home equity loans in the past, you may be surprised to find that the margins are higher than you remember. A margin is what the home loan lender charges above the index for its profit. Lenders are charging a higher margin because of a perceived increase in risk to the investors. Because home values have declined and are still not completely stabilized, investors are hedging their risk with higher margins. Higher margins mean a higher interest rate on your home equity loans.

If you need to remodel your kitchen or bath, repair a leaky roof, send your kid to college, or consolidate your high interest credit card debt, consider applying for a home equity loan today.


About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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