What are the most commonly made mistakes in getting a Home Equity Loan?
Not knowing if your loan has a pre-payment penalty clause. If you are getting a “NO FEE” home-equity loan, chances are there’s a hefty pre-payment penalty included. You’ll want to avoid such a loan if you are planning to sell or refinance in the next three to five years. Getting too large a credit line. When you get too large a credit line, you can be turned down for other loans because some lenders calculate your payments based upon the available credit–not the used credit. Even when your equity line has a zero balance, having a large equity line indicates a large potential payment, which can make it difficult to qualify for other loans. Not understanding the difference between an equity loan and an equity line. An equity loan is closed–i.e., you get all your money up front and make fixed payments until it is paid if full. An equity line is open–i.e., you can get numerous advances for various amounts as you desire. Most equity lines are accessed through a checkbook or a credit card
