Borrowed Equity Amount: The amount of equity in your home that you plan to borrow against.
Interest Rate: The annual interest rate on the loan. Credit history will affect your rate. The lower your interest rate, the lower your monthly payments will be. A slightly higher interest rate may not appear to increase your monthly payment by much, but your financing cost increases significantly.
Example of a Home Equity Loan with Different Interest Rates. $20,000 financed for 5 years.
The higher interest loan would cost $1,115.96 more than the lower rate loan.
Number of Years: The length of the home equity loan is also referred to as the loan term. The number of years determines how long you will be paying on the loan until paid off. Choosing fewer number of years will increase your monthly payment, but you will pay less interest over the life of the loan. Rates are usually higher for longer term loans, adding to the expense of a long loan term.
Example of a Home Equity Loan with Different Number of Years. $15,000 financed with a 5.50% interest rate.