Benefits of Fixed Rate Home Equity Loans


Visitors: 117

People take on home equity loans (second mortgages) for a variety of reasons. One of the most popular reasons is for debt consolidation-they refinance revolving credit cards and pay off personal loans and adjustable rate interest loans to avoid bankruptcy and increase cash flow. Sometimes, a second mortgage provides shorter terms for paying off debt. George Saenz, a tax advisor with Bankrate gives this example in his article “Loan consolidation: Yes!"

Let's say you have $25,000 in debt you've been paying $500 to $600 a month on, and the amount of debt has been the same for a while now. If you refinanced that into a four-year home equity loan at 7.23 percent, your monthly payment would be $601 and you'd get it paid off.

Second mortgages consistently offer lowered interest rates than those of credit cards and unsecured personal loans, resulting in lower monthly payments. The tax deductibility and low interest rates of a home equity loan also make it attractive. The saving from consolidating credit card debt make these fixed rate home equity loans even more luring.

There are two types of home equity loans: home equity installment loans (HEILS) which are generally fixed-rate loans, and home equity lines of credit (HELOCs) which are adjustable rate loans.

The home equity installment loan is a lump-sum loan on which you immediately start paying principal and interest. The adjustable-rate HELOC allows you to draw money as you need it and pay just the interest for several years (the draw period), then pay principal and interest later on during the repayment period. The HELOC will generally give you a lower introductory interest rate than fixed-rate loans, but the rates generally change when the Federal Reserve raises or lowers the federal funds rate. Short-term rates are currently on the rise, which is why so many people are considering converting their adjustable-rate home equity lines of credit for fixed-rate loans.

Fixed rate home equity loans are good for people who know how much they need, which is why they are so popular for debt consolidation. George Saenz says, “I recommend that if you're refinancing debt, get a home equity loan rather than a home equity line of credit (HELOC). " Fixed rate loans have a stated interest rate that does not change over the life of the loan, whereas the rates on adjustable rate loans are linked to an index and change as the index rate changes. The greatest savings for fixed-rate loans can be seen over time when rates increase, as they are steadily doing now. By locking in a low rate now, you could save you a significant amount of money over the long term. Fixed rates provide a borrower with the stability of always knowing what their rates will be.

Maria Ny is a respected free-lance writer who has published many debt consolidation and second mortgage related finance articles. She recommends getting more tips, additional info and free loan quotes at BD Nationwide Mortgage online for everything you need to know about Home Equity Loans . For more 2nd mortgage advice and debt consolidation tips, visit Debt Consolidation Loans and Second Mortgages .


Article Source:

Rate this Article: 
Home Loans Fixed Or Variable Rate?
Rated 4 / 5
based on 5 votes

Related Articles:

Benefits of a Fixed Rate Home Equity Line of Credit

by: Carrie Reeder (December 21, 2005) 
(Finance/Mortgage Refinance)

Debt Consolidation Solutions with Fixed Rate Home Equity Loans

by: Nick Rian (August 02, 2006) 
(Finance/Debt Consolidation)

Lowest 30 Year Fixed Rate Mortgage - Home Equity Loans Online

by: FrankW Ellis (January 12, 2007) 
(Real Estate)

Fixed Rate Home Equity Loan Versus Adjustable HELOC: Comparing 2nd Mortgage ..

by: Maria Ny (July 10, 2006) 
(Finance/Mortgage Refinance)

Fixed Rate Loans: Fixed Rate Mortgages Vs Arm Loans - Is A Fixed Rate Mortgage ..

by: David Domm (June 30, 2006) 
(Finance/Mortgage Refinance)

Second Mortgage Analysis - Fixed-Rate Equity Loan Versus a Home Equity Line of .

by: Maria Ny (June 05, 2006) 
(Finance/Debt Consolidation)

Is the Adjustable Rate Home Equity Loan Right For You Adjustable Rate Home ..

by: Darin Sewell (July 23, 2008) 
(Finance/Home Equity Loans)

Low Rate Home Equity Loans - Tips on Getting the Lowest Interest Rate

by: Carrie Reeder (December 26, 2005) 

Mobile Home Fixed Rate Loans - How to Get Them

by: Gressly Stevens (September 18, 2008) 
(Finance/Mortgage Refinance)

Home Loans Fixed Or Variable Rate?

by: Hector Milla (August 13, 2008) 
(Finance/Home Equity Loans)