Shopping for a HELOC

By Greg Mischio - MortgageLoan.com

It's widely believed that good things in life come to those who ask. This especially applies to those who ask for concessions and perks when shopping around for a home equity line of credit. Talk to potential lenders, and compare their willingness to negotiate on such things as application fees, appraisals, and low introductory rates. The lender will often waive some, or all, of the application fees and settlement costs.

Perks of home equity lines of credit

Lenders will also help you avoid settlement costs on standard mortgages. But when doing so, they generally roll them back into the loan, which means that you'll pay for them eventually over time. They may also do so in exchange for charging you a higher rate of interest, which can be a better bargain for the lender than for you. With a HELOC, you should expect some real concessions on settlement costs with no strings attached. But don't forget to ask, because many of the perks are unwritten, and lenders save them for those times when they need help to woo customers. Many lenders will say "yes" in order to keep your business. It always helps to ask.

Here's another tip: Rather than paying for a fresh appraisal, ask if you can use the same appraisal that was done when you first bought your home. Although lenders will normally not let you use "stale" appraisal data for a typical mortgage, they often allow this when issuing a home equity line of credit. Skipping the new appraisal process can save you hundreds of dollars in closing fees.

HELOCs and margins

As you check off items on your shopping list, always make a note of the HELOC margin. The margin is the amount that your lender can tack on to the prime interest rate, to determine the actual interest rate you'll pay after any introductory discounts expire. Get the lender to spell out exactly what the margin is on your particular HELOC. Then you can choose the lender who cuts the best deal, and not worry about any unforeseen surprises.