How to Negotiate the Best HELOC Rates & Terms

By Nicki Howell

  • Overview

    Opening a Home Equity Line of Credit (HELOC) is a great way to pay for home improvements or other unforeseen expenses. But it's important to get a good rate on these accounts in order to minimize the monthly payment. Here's how to negotiate the best HELOC rates and terms.

    • Step 1

      Meet with your current lender. Financial institutions are very interested in creating deeper relationships with customers. This means lenders will reward customers for having their checking, savings, auto loan and Home Equity Line of Credit with the institution. Let your bank know you are willing to keep all of your business with the institution if they give you the best HELOC rate.

    • Step 2

      Understand what the competition is offering. Companies like Bank Rate publish rates for 100 of the top lenders on their website. The information is typically updated daily. Print off the best rate available, and ask your lender to match the rate.

    • Step 3

      Check your newspaper's business section. This is where financial institutions publish special promotions on Home Equity Lending products. There are also HELOC specials, such as a promotional rate for the first 6 to 12 months of your loan.

    • Step 4

      Check each financial institution's rate and fee schedule. This will allow you to accurately compare closing costs and annual fees on your account.

    • Step 5

      Watch rates even after you open a HELOC account. And if you find a better rate, take it to your financial institution and ask what they can do. Lenders are motivated to retain customers, since it's very expensive to acquire new business.
    • Skill: Moderate
    • Tip: Many lenders assess annual fees to HELOC accounts. This can add up to $100 or more a year. Negotiate with your lender to waive this fee, and get a manager involved if needed.
    • Warning:
    • Don't forget about tax deductions. The interest paid on HELOC accounts may be tax deductible. Your bank will send you a statement at the end of the year. Take this information to your accountant.

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