Every month, HSH collects the latest information on home equity line-of-credit (HELOC) products from lenders in over 24 metropolitan areas around the US. (We also survey for home equity loan "second mortgage" products.)
What's the difference? Both types of loans allow you to tap the equity in your home. The home equity loan is the traditional second mortgage: a loan in effect for a specific term, usually (but not always!) fixed rate. You're approved for X dollars, the lender gives you the check, and you get a repayment schedule.
But the HELOC works like a credit line -- its operation resembles a charge card, like Visa or MasterCard. Commonly, most lines feature an "open" or "advance" period where you can borrow money, followed by a "repayment" period where your access is closed off, and any money you still owe must be repaid. However, there are some which are truly open-ended, and like charge cards, they don't have a fixed term, but can last for as long as you own your home. And HELOCs are almost always variable-rate, tied to the Prime Rate plus some margin, with at least a lifetime `cap` on rate movements. Our listings note whether the HELOC has an "introductory" rate, and if so how long it lasts.Ready to Order?
For everything you need to know when shopping for your Home Equity Line of Credit or Home Equity Loan, order "A Homeowner's Guide to Home Equity Loans and Lines of Credit" for only $4. If you prefer, you can send a money order (no checks, please) to to HSH Associates, Dept HEQ, 237 West Parkway, Pompton Plains NJ 07444.
The single-market sampling listed below lists just a few of the loans in one of the markets we cover.
Homeowners looking for a line of credit should see our Home Equity Showcase, where lenders advertise some of their most competitive home equity loans & and lines of credit.
If you're a Lender, you should also consider advertising in our Home Equity Showcases.
If you need competitive retail market data, HSH's local or national Home Equity surveys are available on a one-time or a subscription basis and are typically marketed to lending institutions and other finance professionals. You can see a sample of the data contained in our competitive market report for HELOCs here. HSH also conducts a similar survey for other types of consumer loans -- including new and used auto loans.
Home Equity Loans and Lines of Credit are getting harder to find and more expensive, too. Stung by losses and the downturn in home values, many lenders have made changes to their Home Equity Line offers or even pulled back from the market altogether.
A few of the changes we've noticed over time include the disappearance of introductory offers, usually low "teaser rates" for the first few months, and that most lenders have dropped their "high-CLTV" programs -- the one which let a borrower leverage 90% to 100% of the value of their homes. More commonplace in the market is 80% or less today, and in some markets even that level is hard to find.
Some lenders have stopped offering lines of credit with small balances (i.e. a minimum $5,000 line of credit) in favor of $10,000 or even $25,000 minimums. Minimum credit scores to obtain lines and loans are moving higher, too, so although rates are low and attractive, getting access to that financing can be a challenge.
Worse, even if you've got one, your lender may curtail your ability to access an existing line, especially of doing so would push the value of your home underwater (or further underwater).
Until home prices stop falling and begin to firm, lenders will continue to tweak their offerings. While still hoping to serve at least some consumers, they must find ways to limit losses on product they offered during boom times. If you're looking for a new line of credit, you'll need to shop much harder than at any time in recent years to find a deal, let alone a good one. Good Luck!
About the HSH survey data below:
The Lines and Loans listed below are for borrowers with excellent credit. While the lines shown are among the best offered in the market listed, there is no one 'best' line that fits every borrower. We strongly recommend that you shop the offerings in your local market, as the actual best deals for Home Equity Lines are frequently made at smaller, local institutions.
Home Equity Lines of Credit are best used for financing on-going credit needs, like college tuition, recurring medical expenses, or continuing home improvements.
Markets shown below will change on a regular basis.
Source: HSH Associates, Financial Publishers, 237 West Parkway, Pompton Plains NJ 07444. Other cities are available.
CLTV: Combined-Loan-to-Value ratio. The sum of the first and second mortgages against the property, expressed as a percentage of the home's value. For example, a home is worth $100,000; the first mortgage is $60,000 (60% LTV) plus a $20,000 second mortgage (20% LTV); the sum of the first mortgage plus the second mortgage is $80,000 (80% CLTV).
Margin: The amount added to the index value to arrive at the line's interest rate. Margins may be positive (i.e. Prime _plus_ 1%, Full Rate Today equals 9.25%) or negative (i.e. Prime _minus_ 1%, Full Rate Today = 7.25%).
Annual Fee: Some lenders will charge you an annually-recurring fee for making the line available. Fees can be 'conditional', changed only if you don't some or all the line over the course of the year.
Advance Period: The 'advance' or 'open' period of the line is the period (expressed in years) when you can borrow and repay money as you need to. At the end of the Advance period, if any outstanding balance remains, you will enter a repayment period, where no new borrowing can take place. Some lines will need to be renewed, renegotiated or may feature a 'balloon' payment, where all the remaining balance becomes due and payable at once.
Repayment Period: The repayment period, expressed in years, begins after the 'advance' period has ended. Usually, you will be required to make payments of principle and interest in order to retire the line of credit in the term listed.
Early Termination (prepay) Fee: A fee levied by the lender if the loan is closed (paid off) before the term has been reached. Fees may be expressed in dollars or percentage points of the remaining outstanding balance. CLS indicates that the lender will charge all costs incurred in making the loan, including appraisals, inspections, taxes and any others which occur.
Early Termination Period: The early termination fee listed will only be levied is the loan is closed during the period show. In the event of a closure after the show time, no termination fee is levied.
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