RSSCAREERS | INVESTING | PERSONAL FINANCE | REAL ESTATE |
HOME > WEALTH > REAL ESTATE
Ask the Real Estate Lawyer - August 9, 2009
By Ilyce Glink and Samuel J. Tamkin
Q: I want to take out a home equity line of credit. Would the process be easier using my current mortgage lender or should I shop around? We only have only one mortgage.
A: In the current market, getting a home equity loan (HEL) or home equity line of credit (HELOC) has become quite difficult. In some cases, that difficulty is due to declining real estate values. But many lenders just don't seem to be as enthusiastic as they once were about approving home equity loan and line of credit applications.
Call it another casualty of the housing and credit crisis.
Go to your current lender's Web site to see if they offer home equity loans and lines of credit. If there's no information about HELs or HELOCs on their sit, you might want to move on to a different lender.
If they do publish rates for these loans, compare them to rates offered by other lenders in your area. If your lender's rates are significantly higher than other lenders, it's a good bet that the lender isn't particularly interested in doing this kind of lending at the moment.
You can go online to BankRate.com to figure out what local and online lenders are offering. You should also check with a credit union, if you belong to one or can join one. Credit unions usually offer better rates on home and auto loans.
In past years, if you had a good credit score you could basically walk out of a bank with a HELOC up to
How much can you get with a HELOC? Some lenders will only give you a line of credit up to 70 percent of what the bank thinks your home is worth. If values have been declining in your area, you might not even qualify for a HELOC in any amount because your home's loan-to-value ratio is too high.
If you know that your current home loan-to-value ratio is somewhat less than the 70 percent, you might be able to get a small line of credit -- but at a higher interest rate.
During the real estate boom years, you could get variable rate HELOC at "prime minus 1." That means that your interest rate would float based on the prime rate (which is currently 3.25 percent), minus 1 percent for an effective interest rate of about 2.25 percent.
Today, lenders are offering far less advantageous rates. In some cases, HELOC rates offered are as high as the prime plus 2 percent or more, for an effective interest rate of 5.25 percent.
Some lenders will offer lower rates for higher lines of credit, so it pays to shop around.
(
For more Real Estate articles and information visit our Real Estate Section (Click Here)
Samuel J. Tamkin is a Chicago-based real estate attorney.
Ilyce R. Glink's latest ebooks are "Save Your House From Foreclosure" and "The Clutter Collector: How to Get Rid of Clutter Everywhere In Your House," which are available at her Web site, www.thinkglink.com. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11 am-1 pm EST. You can also write to Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022
(c) 2009 REAL ESTATE MATTERS DISTRIBUTED BY TRIBUNE MEDIA SERVICES, INC.