See below for New Jersey home equity loan rates for June 9, 2023. Note that interest rates are generally subject to market conditions and can change at any time.
Why a home equity loan? A home equity loan gives you access to cash that you can use to consolidate debt, pay for home repairs or improvements, or make a large purchase. Home equity loans use your home as collateral, so they’re usually best for financially responsible homeowners who have significant equity in their homes.
Your Home Equity Options
What is a Home Equity Loan?
A home equity loan enables you to borrow a lump sum of cash against your home’s equity, which is the difference between your home’s market value and any outstanding mortgage balances. Home equity loans are similar to personal loans and cash-out refinances because they usually have fixed interest rates and a set repayment period.
Most home equity loans are written as second mortgages behind an existing primary mortgage, but you don’t need to already have a mortgage to get a home equity loan.
There are several advantages to a home equity loan:
- Smaller loan amounts. You can usually borrow less than what a cash-out refinance might require.
- You can keep your primary loan. If you have a primary mortgage with a low rate, you don’t have to refinance it to borrow against your equity.
- Lower closing costs. Home equity loan closing costs are usually lower than a cash-out refinance.
- Fixed rates and loan terms. Most New Jersey home equity loan rates are fixed.
- Simpler application process. The application process is usually faster and simpler than a cash-out refinance.
Home equity loans have some potential disadvantages:
- Higher rates than other loan options. Home equity loan rates in New Jersey tend to be higher than cash-out refinance or HELOC interest rates.
- Shorter loan terms and higher payments. Home equity loans often have higher payments because they have shorter loan terms than most cash-out refinances. However, this also means you’re paying off the loan faster.
- You have to borrow the full amount up front. Most home equity loans have only a lump sum payout. You have to borrow the full amount up front even if you don’t need all the money right now.
If you have a low-rate mortgage already and don’t need a huge amount of cash, a home equity loan could be a good option for you.
Home Equity Loan Vs Home Equity Line of Credit (HELOC)
Home equity loan rates in New Jersey are usually fixed. The full loan amount is borrowed at closing and repaid on a monthly basis over a set loan term (such as 10 years, 15 years, etc.).
A home equity line of credit, or HELOC, usually has a variable rate (but not always). HELOCs are revolving credit lines (similar to credit cards) and the payments are usually interest-only.
How to Get the Best New Jersey Home Equity Loan Rates
If you want the best home equity loan rates in New Jersey, you need to have strong credit scores. New Jersey home equity loan rates are heavily dependent on credit scores.
Debt-to-income ratio sometimes matters as well, but the rate will be determined largely by your credit scores.
Credit scores range from a low of 350 to a high of 850. According to Credit.com, the average credit score in the United States was 711 in 2021. There are five main factors that influence your credit scores:
- Payment history: 35%. It’s very important for your credit scores that you make your payments on time.
- Credit utilization: 30%. If you have high utilization (i.e., you’re “maxed out”) on credit cards, expect your scores to suffer even if you make your payments on time. Keep your utilization below 30% of the credit limit.
- Credit age: 15%. Length of credit history is important. Avoid closing old accounts unless absolutely necessary.
- Credit mix: 10%. Lenders like to see a mix of different types of credit accounts, such as revolving (credit card) accounts and installment loans like mortgages, car loans, etc.
- New credit: 10%. Be careful when applying for new credit cards or loans. Too many new accounts can damage your scores.
How Can I Improve My Credit Scores?
New Jersey home equity loan rates depend on credit scores, so you want to keep your scores strong.
The best way to improve your credit scores is to make your payments on time.
It’s also important to avoid overutilizing your revolving credit. High utilization can damage your credit scores even if you make your payments on time.
If you’d like to close a few accounts, close your newer accounts first. Length of credit history contributes to good scores.
Be careful not to open too many new accounts at one time. If you’re shopping aggressively for new loans, it may hurt your credit scores.