Take advantage of the LOW rates!

Now is the time to take out a home equity line of credit or to refinance your mortgage. Rates are as low as I could remember. You can find fixed 30 year and 15 year mortgages below 5.00% and if you set up an automatic payment from your checking account, you might be able to lower that rate by .25%.
Home equity rates are also low....very low, if you already own a home and are thinking about making any types of improvements to your home or any major purchases or if you just want to have an emergency source of funds, then you need to apply for a home equity line of credit. The home equity line of credit has so many benefits and features that it is by far my favorite bank product to offer home owners an I will tell you why. Home Equity Line of Credit:

• no closing costs (up to certain amounts, check before you apply)
• use the funds for any major expenses
• option to pay low monthly interest payments only
  
• revolving line, if you pay it down you can use it again, like a credit card
• lock in feature, you may be able to lock in a portion of your line at a fixed rate (check before you apply)
• immediate access to your funds with checks or online
  
• only pay interest on what you use
• interest paid may be tax deductible (ask your tax adviser)

Interest rates on home equity lines of credit are based off the bank's prime rate which is the rate that is charged to bank's best customers. Whenever the prime rate changes, your rate will change accordingly by the percentage amount that the Prime rate changes by. So what you want to focus on when you are shopping around for rates is the spread or margin that you will be charged on the line of credit and for how long. You will either be quoted a rate of Prime (+) or Prime (-). Example: If a bank will offer you a line at Prime + 1.00%, that means that your rate will be Prime, currently as of 1/13/08 @ 3.25% plus 1.00% = 4.25%. Be sure to ask what the spread will will be for the LIFE of the line. Some banks will entice you with a teaser rate, e.g. Prime -1% for 6 months and then after the introductory period, the rate adjusts. In this rate environment, since prime rate is so low, don't expect to see many Prime (-) offers. Other factors that you want to consider about HELOCS:

• pre-payment penalties, find out if there are any
• does the line have a floor (lowest rate that you will pay)
• does it have a ceiling (highest rate you can pay)
• the better you credit score, the lower your rate and vice verse
  
• the lower your LTV (loan to value) the lower rate and vice verse
  
• inquire if the bank charges a yearly fee
  

The best time to take out a home equity line of credit is when you don't need it. It is not an overnight process and you don't pay anything if you don't use it. From my experience, I have never seen the prime rate so low and I don't see it going up dramatically for at least a couple of years. The Prime rate is published by the Wall Street Journal.