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5 Tips for Getting the Best Home Equity Loan or HELOC Rate

There are several ways to improve your home equity line of credit rate like cleaning up your credit, making on-time payments, and shopping around.

If you are looking to leverage the equity you’ve built in your home to borrow money, you are probably considering getting a home equity loan or a home equity line of credit (HELOC).

What you may not be aware of, though, is that there are ways to improve the rate you get on your HELOC or home equity loan, thus saving you money in the long term.

Key Differences Between a HELOC and a Home Equity Loan

Home equity loans and HELOCs are similar in that they both leverage the equity you’ve built in your home to borrow money at a low-interest rate. However, there are a few differences worth noting.

Home equity loans are similar to other types of loans in that they are disbursed as a lump sum that you pay back over an agreed-upon term.

On the other hand, a HELOC is more like a credit card. It is a revolving line of credit, which borrowers can utilize as needed. Once you pay back the money borrowed from a HELOC, you can borrow more money.

Ways to Improve Your HELOC Rate

Regardless of whether you decide to utilize a HELOC or a home equity loan, you can improve the deal you get on the money you borrow by optimizing your rate.

1. Monitor and clean up your credit if needed

The best way to get a good rate on any loan, including a HELOC or home equity loan, is to monitor your credit.

You’ll want to make sure that there are no errors on your credit report by checking it regularly. In addition, you’ll want to make an effort to improve your credit score before taking out a HELOC or home equity loan. Improving your credit can be done by ensuring all payments are on time, not taking on new debt, and being responsible with your credit cards.

2. Pay off existing debt if possible and improve your LTV ratio

Paying off your debt, in general, can improve your credit score and make you more attractive as a lender. However, paying off more of your mortgage before you borrow can also improve your loan-to-value ratio, or LTV ratio.

The LTV ratio on your home is the ratio between the amount you owe and the value of your home.

For example, if your home is worth $400,000 and you owe $200,000, the LTV ratio is 50%. Reducing your LTV as much as possible so that you have more equity and owe less money will likely improve the rate you can get on a HELOC or home equity loan.

3. Understand the differing payment and loan terms

When deciding between two home equity loans, you’ll want to make sure you’re comparing apples to apples. In other words, be sure that the loans have the same terms and conditions. The longer a loan’s term, the longer it will accrue interest — and the more it will cost.

When comparing a HELOC to a home equity loan, however, there are additional factors you need to consider.

First, the interest rate for a home equity loan is typically fixed, while that of a HELOC usually varies over time. Second, your home equity loan payments will remain the same for the life of the loan, while those associated with a HELOC can change monthly. These factors are important to consider when choosing the rate and type of loan that is best for you.

Finally, when comparing costs, look out for balloon payments. A balloon payment is a lump sum that you pay at the end of the term. It is made up of the residual expense you haven’t paid off during the course of the loan. Sometimes, lenders advertise low rates, but these can mean that you’ll owe a balloon payment at the end of the repayment period.

4. Work with the lenders you know and trust — like your credit union (ahem)

When you’re looking for a lender to take out a HELOC or home equity loan, it’s a good idea to start with lenders you know and trust. Heading to your credit union first gives you a place to start, but it can also save you money.

Many lenders will give you a better deal if you hold multiple loans with them. For example, if you already have your mortgage through your credit union, taking out a home equity loan with them as well can get you a special discount. In addition, credit unions already offer competitive rates due to their not-for-profit status. Learn more about Listerhill's competitive rates.

5. Shop around

In addition to shopping for rates at your local credit union, you’ll want to survey rates available from other lenders. Shopping around and keeping track of the options available from different lenders can help you get the best deal.

Start Looking for a Low-Rate Home Equity Loan or HELOC Today

You can start the process of leveraging your home equity by checking out our competitive home equity loan and HELOC rates today.

Click here to learn about our HELOCs and home equity loans.

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Frequently Asked Questions

  • How does a cash back credit card work?

    Our cash back credit card gives you a flat rate of 2% back on all of your purchases. It acts as a rebate that you can redeem for cash as a statement credit or direct deposit in your account.

  • How do I receive an incoming wire transfer at Listerhill?

    All incoming wires must be received using Listerhill's routing number of 262277011. The member should use the routing number along with their member number and share ID suffix or their draft number when receiving a wire.

    Wire to:

    Listerhill Credit Union

    4790 E. 2nd Street

    Muscle Shoals, AL 35661

    1-256-383-9204

    ABA No.: 262277011

    For credit to the account of:

    Member's Name:

    Member's Address:

    Member's Account No.:

  • What does it cost to send or receive a wire transfer?

    Incoming Domestic Wire Charge: $20.00

    Outgoing Domestic Wire Charge: $20.00

    Incoming Foreign Wire Charge: $35.00

    We do not process outgoing foreign international wires. We can receive them only.

  • Can I conduct a wire transfer through Listerhill?

    Listerhill is capable of receiving incoming wire transfers and sending outgoing domestic wire transfers. All Branch Managers, Loan Officers, Senior Member Advocates, Member Advocates, and Tellers can provide our members with information needed to receive incoming wire transfers.

    Branch Managers, Member Advocates, and Senior Member Advocates can assist with processing outgoing domestic wires.

    We do not process outgoing foreign international wires. We can receive them only.

  • How do I qualify for membership at Listerhill?

    To qualify for membership with Listerhill, you must meet one of the following requirements:

    • If you live in the states of Alabama, Georgia, Mississippi, Florida, or Tennessee, you are eligible to become a member.
      • Depending on your individual eligibility requirements, we may require membership into an approved association at no cost to you.
    • You can also qualify for membership by being a family member of a current or potential Listerhill member.