The Federal Reserve has lowered the fed funds rate by .75% and the prime rate is now at 6.5%, is it a good time to take out a home equity loan?:

The benefit of a lower fed funds rate is that rates on credit cars, auto loans and equity loans should now be more favorable The challenge is that almost all banks have dramatically changed their guidelines for home equity loans or home equity lines of credit. The main reason for this has been the fall out in the housing industry. With home sales declining in most major market places, lenders are moving away from offering any type of second mortgage. The problem lenders have had is that because these are second mortgage or second liens on the property, they have been taking dramatic losses with home owners foreclosing on their properties, the first mortgage being satisfied and often little money left over to pay off  the second lien or mortgage. If you are able to find a lender who offers an equity loan, expect restrictions on the loan to value to be as high as 80% and very tight credit and income guidelines. The fed rate cut will probably benefit homeowners who have equity loans more than home owners who would like a new equity loan. © LowRateMortgage.com 1-23-2008

 

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