1. Get prepared
2. Use your equity
3. Compare loans
4. Evaluate offers
   1. Is this a fair loan for you?
   2. Know your payment outlook
   3. How you can avoid costly penalties and fees
   4. Which loan works best for you?
5. Handy calculators for equity borrowers

Know Your Home Equity Loan Payment Outlook

You’ve been offered a loan and the numbers look good, but it’s difficult to know exactly what your monthly payments will be. After all, this is the number you will need to budget for each month. Let’s make sure it’s a number you can live with.

Fixed-rate home equity loans make it fairly easy to determine your monthly payments. HELOCs are more complicated and there are two factors you should know about that determine your payments – the prime rate and margin. The prime rate is what your interest rates are tied to.

The margin is extra points your lender charges for the loan. The prime rate plus the margin determines your interest rate. At the end of your initial period, the margin and current prime rate are added together to determine your new interest rate. Margins are included in most HELOCs, so make sure this is a number you can live with. The combination of both higher prime rates and your margin can often cause your payments to increase quite a bit at each adjustment.

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