Know Your Home Equity Loan

According to bankers, the recent fever to tap home equity has finally cooled. Now, new fixed-rate offerings are attracting homeowners to convert adjustable rates to more predictable payments. This way, clients are now taking home equity loans with fixed payments for five to 30 years. The loan comes at a fixed interest rate and at least a small amount going to pay off the principal every month.

Since conversions allow consumers to convert all or part of their adjustable rate balance to a fixed rate, increasing numbers of customers are now converting. Even banks are now promoting the fixed rate rather aggressively. With this method, you are essentially locking in a portion of the borrowed money at a fixed rate. This can be paid back in principal and interest. Madison.com reports:

Rates on home equity lines of credit are higher versus one and five years ago, while rates on fixed-rate home equity loans are lower than five years ago, said Greg McBride, senior financial analyst for Bankrate.com., an Web-based aggregator of financial rate information.

Read more: Getting a fix on home equity loans