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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 do I connect my additional Listerhill account(s) in Online Banking?

    In order to add an additional Listerhill account in Online Banking, please:

    1. Log in to Online Banking through our website.
    2. Click the Accounts tab at the top.
    3. Click “Connect An Account”
    4. To add a Listerhill Account, click “Listerhill Credit Union Account”.
    5. Enter the appropriate information on this screen and select the appropriate account type.
      1. Account Number.
      2. Nickname the Account.
      3. Select the Account Type.
        1. Share Draft – Checking
        2. Share – Savings
        3. Share Certificate – CD
        4. IRA
        5. Line of Credit
        6. Loan
        7. Credit Card
      4. Check the box for Bill Pay if desired.

    Once finished, the new account will be added by the next business day.

  • How do I connect my credit card(s) in Online Banking?

    In order to add a new credit card in Online Banking, please:

    1. Log in to Online Banking through our website.
    2. Click the Accounts tab at the top.
    3. Click “Connect An Account”
    4. To add a credit card, click “Listerhill Credit Union Account”.
    5. Enter the appropriate information on the screen and select the appropriate account type.
      1. Account Number.
      2. Nickname the Account.
      3. Select the Account Type.
        1. Share Draft – Checking
        2. Share – Savings
        3. Share Certificate – CD
        4. IRA
        5. Line of Credit
        6. Loan
        7. Credit Card
      4. Check the Box for Bill Pay if desired.

    Once finished, the new card will be added by the next business day.

  • What if I had merchandise points?

    Cashbackmall will be available for redemption on 9/1/22 for cards converting to cash back rewards from merchandise points.

  • Who is eligible for Cash Back Rewards?

    Cash Back Rewards are available for Listerhill Signature Credit Cards. Signature credit cards require a limit of $5,000 or greater.

  • How much do I get back in Cash Rewards?

    Cash Back Rewards are calculated at 2% on purchases. Cash Advances and Balance Transfers do not earn Cash Back Rewards.