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CBS News
a day ago
- Business
- CBS News
4 home equity borrowing questions lenders say they're often asked
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. There are some common questions that lenders say they're often asked by home equity borrowers. Getty Images Interest rates aren't great right now — at least on most consumer borrowing products. If you're a homeowner, though, you actually have access to some of the lowest-rate options around: Home equity loans and home equity lines of credit (HELOCs). Both these options offer fairly affordable interest rates, specifically when compared to high-rate alternatives like personal loans and credit cards. And they're fairly easy to get, as long as you have enough equity built up in your home. But borrowing from your home equity is a little different than taking out a credit card or unsecured loan. So you'll want to be informed before formally withdrawing equity. We asked some home equity lenders about the questions they're often asked about — and what you need to know before diving into the home equity process yourself. Start by seeing how much home equity you could withdraw here. 4 home equity borrowing questions lenders say they're often asked Here are four questions the lenders we spoke to said they're often asked by homeowners about home equity borrowing: What's the difference between HELOCs and home equity loans? The two main types of home equity borrowing products are HELOCs and home equity loans. And while both let you take money out of your home equity, they aren't the same. "A HELOC is a line of credit so you do not have to take all the money at once," says Jennifer Beeston, executive vice president of national sales at "You can take it as you need it. With a home equity loan, you are taking the money out in a lump sum upfront." Another key difference lies in how interest works on these products. First, home equity loans come with fixed rates, giving you a set payment for the entire loan term. HELOCs, on the other hand, usually have variable interest rates, which can go up or down depending on the market. "HELOCs will often utilize variable interest rates that adjust based on the index they are tied to," says Scott Bridges, chief consumer direct lending production officer at PennyMac. "This means your payment may fluctuate over time." As far as which product you should get, it depends on your goals, experts say. "HELOCs are a good option for ongoing costs or projects where expenses may vary," Bridges says. "Home equity loans are better suited for those that want their cash all at once, where you know the amount needed for debt consolidation, major expenses, or home renovations." Compare your HELOC and home equity loan options here to learn more. How much can I borrow? How much you can borrow will depend on the lender you choose, but typically, you can take out somewhere between 80 to 90% of your home's value, minus your current mortgage balance. So, if your home is worth $400,000 and you have a mortgage balance of $150,000, you could potentially borrow around $210,000 using a home equity loan or HELOC (400,000 x .90 - $150,000). "The exact amount depends on your credit score, income, and lender guidelines," says Brett Schiffer, chief credit officer at CrossCountry Mortgage. John Aguirre, a mortgage originator at Loantown, works with his equity clients to "come up with a thorough plan" before determining how much they should borrow, he says. "It's a plan that outlines how much they need, plus a small pad for unforeseen expenses that arise," Aguirre says. What are the rates and fees? Like all mortgage products, the interest rate you will get on a home equity loan or HELOC will depend on your financial details, as well as the value of your house. Historically, home equity loans have had lower interest rates than HELOCs, though that hasn't been the case in the last few months. Either way, "To qualify for the lowest rates, a credit score of 740 or above is ideal," Schiffer says. "Also, having a lower loan-to-value ratio, meaning more equity in your home, can help you secure a better rate. In general, shorter loan terms also tend to come with lower interest rates." Both home equity loans and HELOCs can come with closing costs, often equaling somewhere between 2 and 5% of the loan amount. Some lenders may waive closing costs for HELOCs, though they often come with a higher interest rate or other trade-offs in return. Some HELOCs may also have annual and draw fees that Bridges advises borrowers to look for, too. What can I use the money for? Technically, you can use the funds from a home equity loan or HELOC for virtually anything. "One of the biggest advantages of a home equity loan is its flexibility," Schiffer says. "Common uses include paying off high-interest debt, taking care of emergency expenses, renovation projects, financing a child's college education, paying for a wedding, buying a car, and increasing funds in savings and retirement accounts." Some borrowers even use the money to purchase additional properties. "We're seeing many clients use home equity lines to cover down payments and closing costs on investment properties," Schiffer says. "This effectively leverages their home equity to build a portfolio of income-generating real estate." Know the risks Home equity loans and HELOCs can be affordable ways to borrow cash, but make sure you're prepared for the payments they come with before taking one out. With home equity products, your home serves as collateral, so if you miss payments, your lender could file for foreclosure and seize your house. If you're not sure a home equity loan or HELOC is the right move for your finances, talk to a mortgage professional or financial advisor first. They can help you make the right decision for your specific situation. Learn more here now.
RNZ News
2 days ago
- Business
- RNZ News
Kiwibank cuts home loan interest rates
Photo: Kiwibank Kiwibank is the latest bank to cut home loan interest rates. It has cut its one-year special fixed rate to 4.89 percent, its two-year to 4.95 percent and its three and six-month rates to 5.29 percent. It is also cutting a number of its term deposit rates by between 10 basis points and 15 basis points. The official cash rate has fallen from a peak of 5.5 percent to 3.25 percent. But a warier tone in the most recent update has raised questions about how much further the rate might fall. The decision went to a vote, and one member of the monetary policy committee was not in favour of a cut. That prompted swap rates to pick up a bit, although they have started to drift down again since. David Cunningham, chief executive of mortgage advice firm Squirrel, said the main retail interest rate movements now would be driven by competition between the banks. "Pre-OCR, the two-year swap was 3.12 percent. It bounced a bit and has drifted down, but is still slightly higher than a month ago. "I'd say that until we get a decisive move in wholesale rates below 3 percent, any fixed rate moves by banks will be at the margin as banks jostle for positioning. Maybe we'll see 4.75 percent one- or two-year rates but a break towards 4.5 percent would need another OCR cut and signals of more to come. That would be three to six months away, if it did happen. "Long story short, fixed rates are likely to hover around existing levels for a wee while." Last week, ANZ on Tuesday cut its 18-month fixed rate special by 10 basis points to 4.89 percent. The six-month rate dropped by 20 to 5.29 percent. Then on Wednesday morning, ASB cut a range of its fixed home loan rates by up to 20 basis points. It was the bank's seventh fixed rate mortgage drop of 2025. Its six-month rate drops by 14 basis points to 5.45 percent, its one-year by four basis points to 4.95 percent, its 18-month rate by 10 basis points to 4.89 percent, its two-year by four basis points to 4.95 percent and its three-year by 20 basis points to 5.15 percent.
News.com.au
5 days ago
- Business
- News.com.au
Bank customers stung with loyalty tax
You'd be forgiven for thinking that your bank rewards you for your loyalty. And you wouldn't be alone. A survey of 1000 Australians has revealed that 70 per cent of people consider it important that lenders offer long-term customers the same rates or benefits as new customers. The survey also found that nine in 10 people would switch lenders if they found out they were paying a higher interest rate than new customers. 13 Aussie banks refusing rate cut However, if you've had your home loan with the same lender for a few years, you could be getting charged a 'loyalty tax' – this is the difference between the rates lenders charge new customers compared to existing customers. And over the life of your loan, this can make a huge difference in the total amount of interest you pay. Calculations from non-bank lender Athena Home Loans using data from the Reserve Bank show that keeping new customer rates for the life of a 25-year loan can mean significant savings for borrowers of up to $1428 per year, or as much as $35,713 across the life of the loan. This figure is based on a $600,000 loan and the average interest rate difference between new and existing loans since September 2019. This year, we've already seen the Reserve Bank deliver two cuts to the cash rate, and most lenders have responded by lowering their home loan interest rates. It's important to check what your bank has done, and to compare your interest rate against those being offered to new customers. The survey also revealed that 13 per cent of borrowers go more than two years without reviewing their home loan. It's good practice to review your home loan once a year but you don't necessarily have to refinance to access a better rate. You might be able to negotiate a better rate with your existing lender just by asking. If the thought of that fills you with dread, a mortgage broker can negotiate on your behalf. And if your existing lender isn't willing to offer you a more competitive rate, your broker can do the legwork to help you refinance to a lender that will. Anthony Waldron is Mortgage Choice CEO
The Australian
29-05-2025
- Business
- The Australian
Interest rates, inflation: CBA slashes fixed rate as banks race to cut interest on mortgages
The Commonwealth Bank of Australia has announced on Thursday it will slash fixed rate home loans by up to 0.40 percentage points across all fixed terms, but experts say it will not be enough to get Aussies to lock in. The change will be in place from Friday, to coincide with a 0.25 cut in CBA's variable rate following the RBA cash rate cut earlier this month. CBA's new lowest fixed rate will be 5.49 per cent for three years. CBA to cut rates, experts say it's not enough. Picture: NewsWire / Luis Enrique Ascui However, ANZ will retain the lowest one and two-year fixed rates among the big four banks. National Australia Bank will also keep their crown of having the lowest three, four, and five-year fixed rates. data insights director Sally Tindall said while CBA's rate cuts bring it closer to its competitors, they're unlikely to send customers rushing to move their business. 'Fixed rates have been falling fairly consistently this year and we expect this activity will continue as banks price in the increasing likelihood of further cash rate cuts,' Ms Tindall said. 'CBA's fixed rate cuts aren't groundbreaking, but rather a bid to inch closer to its key competitors.' The move comes as all five major banks cut fixed rates after the RBA's decision earlier this month. Picture: NewsWire / Gaye Gerard Ms Tindall said the announced rate cuts also may not be enough to incentivise Aussies to lock into fixed rate home loans straight away. 'With just a 0.10 percentage point difference (between variable and fixed interest rates), and the possibility of further RBA cuts ramping up, it's hard to see many people jumping at the chance to lock up their mortgage for the next three years,' she said. 'We expect banks big and small will continue cutting fixed rates over the next few months. 'The majors might have to offer a fixed rate in the '4's' if they're serious about getting people to lock in their rate. Borrowers may need more incentive to Picture: NCA NewsWire / Luis Enrique Ascui 'If you're deciding between a fixed or variable rate, understand what might suit your finances and to some extent, your personality. When you make a decision, take the time to look for a competitive rate.' Five major lenders, excluding CBA, have cut fixed rates since the RBA's decision, while 20 lenders have already cut one fixed rate this month, rate tracking shows. A total of four lenders – BOQ, Community First Bank, Police Bank and Queensland Country Bank – are now offering at least one rate under 5 per cent at 4.99 per cent. Read related topics: Commonwealth Bank Of Australia Summer Liu Cadet Summer Liu started out in the legal and policy space, before taking on external stakeholder and media engagement roles. She is now a journalist with News Corp Australia's 2025 Editorial Cadet Program. Summer Liu
News.com.au
29-05-2025
- Business
- News.com.au
Major Aussie banks to slash home loan rates
The Commonwealth Bank of Australia has announced on Thursday it will slash fixed rate home loans by up to 0.40 percentage points across all fixed terms, but experts say it will not be enough to get Aussies to lock in. The change will be in place from Friday, to coincide with a 0.25 cut in CBA's variable rate following the RBA cash rate cut earlier this month. CBA's new lowest fixed rate will be 5.49 per cent for three years. However, ANZ will retain the lowest one and two-year fixed rates among the big four banks. National Australia Bank will also keep their crown of having the lowest three, four, and five-year fixed rates. data insights director Sally Tindall said while CBA's rate cuts bring it closer to its competitors, they're unlikely to send customers rushing to move their business. 'Fixed rates have been falling fairly consistently this year and we expect this activity will continue as banks price in the increasing likelihood of further cash rate cuts,' Ms Tindall said. 'CBA's fixed rate cuts aren't groundbreaking, but rather a bid to inch closer to its key competitors.' Ms Tindall said the announced rate cuts also may not be enough to incentivise Aussies to lock into fixed rate home loans straight away. 'With just a 0.10 percentage point difference (between variable and fixed interest rates), and the possibility of further RBA cuts ramping up, it's hard to see many people jumping at the chance to lock up their mortgage for the next three years,' she said. 'We expect banks big and small will continue cutting fixed rates over the next few months. 'The majors might have to offer a fixed rate in the '4's' if they're serious about getting people to lock in their rate. 'If you're deciding between a fixed or variable rate, understand what might suit your finances and to some extent, your personality. When you make a decision, take the time to look for a competitive rate.' Five major lenders, excluding CBA, have cut fixed rates since the RBA's decision, while 20 lenders have already cut one fixed rate this month, rate tracking shows. A total of four lenders – BOQ, Community First Bank, Police Bank and Queensland Country Bank – are now offering at least one rate under 5 per cent at 4.99 per cent.
