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Balancing mortgage rate (Comstock Images/Getty Images/Comstock Images)
Balancing mortgage rate (Comstock Images/Getty Images/Comstock Images)

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Home ownership isn't for everyone Add to ...

To switch from monthly to bi-weekly or other payments options is easy and you can do it more often, please check with your lender before you make a change.

Home Equity Line of Credit (HELOC)

A home equity line of credit is available to homeowners who have at least 20% equity in their homes or have a 20% down payment for a new mortgage. Basically, you can convert your mortgage into a line of credit, keeping your payments flexible with a minimum payment of interest only. You won't have to pay down the principle unless you want to do so. The interest rate on a HELOC should always be at the prime rate.

This product has the flexibility of allowing you to fix part or all of the balance in the line of credit in any type of term you want. For example, assume you have a HELOC with a limit of $100,000. You could have a $40,000 fixed-term mortgage at a certain rate, $50,000 variable portion, and the last $10,000 left in an open term. When you pay down your mortgage, you will have the portion paid to be used anytime you need it as available credit. As your mortgage balance decreases, your available credit increases. This is great because it allows you to be more aggressive with paying off your mortgage and you can still have a line of credit available to you if you need it.

A HELOC can provide you with a credit facility for life, as long as you have your house. It is also portable to another property if you sell what you own and get something new. There are fees associated with setting up a HELOC: about $500 in legal fees and $300 in other costs. You can have this waived by your bank if you have a good portfolio and good record. You can close a HELOC anytime if you do not have a balance. The only fee you have to pay is a $300 discharge fee.

I have a HELOC on my house and rarely use it, but it is there if I need to buy a car, pay tuition for my children, or I need to borrow for any other reason. It is my safety net and, of course, I did not pay any set up fees since I got the bank to waive them.

Rate Negotiation

Rate negotiation is important-you should be getting the best rate possible. The first step is to get familiar with the market. What kind of interest rates are out there? Prior to walking into a bank, research the posted rates on the internet or in the newspapers. The first stop should be your primary bank. You already know what the lowest rate on the market is, so ask the bank specialist what kind of interest rate they will give you as a valued client. If he gives you a higher interest rate than your research is showing for your chosen term and type of mortgage, just tell him that you are not happy with it. Ask him what the best he can do is. Tell him that you are shopping for a rate right now and when you decide who will be your lender, you will give that firm permission to check your credit record. (You have already checked your record and it is more than 680 points, right?)

Now, go to another bank and ask them for their lowest rate for the same term and same type of mortgage. Compare the rates. They will probably ask you what interest rate you have been given by your bank and I am absolutely sure they will come up with a lower rate. They will lower the rate they offer just to get your business.

Now you can continue checking several other banks. You may even want to go back to your first bank or one of the others to see if they want to make you a better offer. Once your think you have the best rate you can get, make your decision and sign the papers. Please do not forget to check the features and benefits with each bank. If you can get even an extra 0.05% off the interest rate, it can mean in thousands of dollars saved.

Most people spend more time planning their vacation or buying shoes than researching mortgage rates.

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