| To compare
the costs of your home equity loan, you must first be
aware of the different kinds of fees associated with the
loan. An APR (annual percentage rate) is a calculation
of the interest rate and additional fees. So searching
for the lowest available
APR among loans with the same terms, is a good way
to find the right loan.
Two of the fees that are included in the APR, are Points
and Closing Costs. Closing costs are fees due at the beginning
of the loan (paid during closing).
Points are used as a bargaining chip to reduce the payment
amount of loan interest rate. A point is usually represented
by one percent of the total loan value. So if your loan
calls for 1 point at the end of its term, you will be
expected to pay 1 percent of the loan amount. In some
cases, points will be paid down at closing and in other
cases may be called up at the end of a loan term.
Points and closing costs can be adjusted in order to
make the loan more compatible, but changing them can affect
your interest rate directly. If closing costs and points
are reduced, chances are your interest rate will increase.
If on the other had your points and closing costs are
increased, you interests rate should go down resulting
in lower monthly payments.
If a lender promises no fees there is a strong possibility
that the fees have been included in the loan amount and
are financed with interest. Find a balance that is good
for you can compare your APR to make your final choice.
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