Low Interest Home Equity Loans
by Emily Kerr

Getting a low interest home equity loan can mean having money to make significant purchases, including a down payment on another home or automobile, paying off tuition or paying for vacations or weddings, consolidating bills, or paying down other loans. Getting a low interest home equity loan is an important consideration.

Refinancing a loan can shorten the term for the mortgage, but even with a low interest home equity loan, a shorter term can mean a higher monthly payment. The benefit is that you'll build equity faster by paying more into the home each month and you'll pay less in total interest overall for the length of the loan.

When refinancing a home, mortgage companies offer a range of interest rates at different amounts of points, a point being one percent of the loan amount. For example, three points on a $200,000 mortgage loan would add $6000 to refinancing charges. Points are generally considered one-eighth to one-quarter of one percent of the interest rate the company is offering. This means that the lower the interest rate, the more points a bank or mortgage company will generally charge. While application costs or monthly payments may be more, the saving you’ll get from a low interest home equity loan over the life of the loan may be well worth it.

For example, a couple taking a 15-year fixed rate loan at 6.75 percent to replace a higher rate adjustable 30-year mortgage may find themselves paying a couple hundred more on a monthly basis but they'll own their home outright faster than on their original mortgage and the total interest on the 15-year loan will be less than half of the total on the longer loan.