The cost of a home equity loan is made up of factors including interest, property taxes, homeowners insurance, private mortgage insurance, processing fees, brokerage commission, fees and closing fees. The structuring of the interest rate is subject to the prime interest rate, stock market, inflation, demand and supply in the credit market, and other aspects.

Your credit score, loan-to-value ratio, loan term (short or long term), down payment amount, and place of residence are also considered when a lender submits a quote. Some of these may leave room for negotiation. The possibility of reducing or eliminating certain cost factors such as the commission (the higher the rate, the higher the commission for the consultant), does exist. With some companies, the costs are lower due to their great efficiency. Also, lenders offer discounts on certain details.

Therefore, it is advisable to shop around and compare the cost breakdown to decide on the best purchase. A lower interest rate alone may not tell the whole story. It doesn’t always have to mean the cheapest loan and could even be a ruse to get your attention. You can approach agencies sponsored by the US Department of Housing and Urban Development (HUD) for free advice if needed.

The low interest rate can sometimes present a strange situation. For example, a 15-year fixed-rate home equity loan would earn less interest than a 30-year loan for the same amount. But your monthly payment would be considerably higher in the first case. You could possibly opt for a 30-year loan and invest the difference between the monthly payments more profitably elsewhere. This should be taken into account when trying to decide on the type of loan. What matters is what is best for you and the rate and terms offered by different lenders for that specific loan.

There is one thing you can do to get better terms from lenders: improve your credit rating. Getting advice is easy.