About Michigan Home Equity Rates

Home equity rates are based on a number of factors. Home value, credit score and loan amounts are major factors when lenders calculate home equity rates. However, rates are affected by the state in which you reside. Certain states, like Michigan, have specific controls over lending and assigned rate caps, so it's important to do research when applying for a home equity loan in these states.

Significance

Home equity rates in Michigan are generally higher than most states. These rates control not only profits headed to loan institutions, but also the growth of the state economy. With the decades old contracting of the auto industry, Michigan has steadily increased its rates to continue to push the economy forward. It is quite important, therefore, to have strong credit score to secure the lowest state-allowed home equity loan rate.

Considerations

Equity rates, especially in Michigan, are tied to factors like: home value, credit score and loan to value (the value of your home versus the current loans outstanding against that property). Make sure that you understand an equity loan's terms and fees before signing on at a particular rate. Many lenders in Michigan seek to attract new business by offering teaser rates that, while offering initially low payments, can adjust to much higher levels hindering the ability of the borrower to repay.

Types

Some of the equity loan types in Michigan are: revolving loans, closed-end loans (typically referred to as second mortgages) and construction loans. The rates on revolving loans tend to be between 8 to 10 percent, but are also the most liable to be adjustable rates. Closed-end loans tend to offer higher initial rates (9 to 11 percent), but are often fixed for the life of the loan and offer more concrete payments and fees. Construction loans are very property-specific, but often offer even higher rates due to the risk involved with creating a piece of real estate, rather than securing an existing one.

Benefits

Securing an equity loan in Michigan offers several benefits. First, the rates on the revolving loans can be low, and if handled with scrutiny and care, can be an effective way to make home repairs, finance college education, or fund a nest egg. Closed-end equity loans, while the rates may be higher, offer a solution to homeowners who are looking for security and a definite term end.

Warning

Make sure to review all loan documents with someone you trust. Finances can get murky, especially when lenders are close to securing a deal. Make sure the terms, rate and payment are well under your budget and you can control the loan for the long-term, not just the next few years or months.