Get Your Home Equity Loan Into a Relationship

Banks will encourage their customers to have multiple accounts and services with them. It is good for them because they are more likely to have long-term customers, and it is good for you because you get special incentives and discounts for having your multiple accounts at one bank. These accounts are said to have a relationship with each other, and this is sometimes called “relationship banking.”

For example, if you have a checking account, savings account, and home equity loan all open with the same bank, then with a relationship banking program, the balances in all three of them may contribute to the combined balance requirement.  Also, some fees on the checking account, such as the maintenance fee and foreign ATM fee, may be waived if your accounts have this relationship.  Thus, with relationship banking, all of your accounts help to maintain the others.

What This Means For You
If you are a homeowner and thinking about opening a home equity loan or line of credit, then you should consider relationship banking. If you already have one or more accounts open at a bank, then you should ask your current bank if they offer a relationship banking program, and if so, what benefits you would receive if you were to take advantage of it by opening a home equity loan with them.

Here are some of the possible benefits that would result from having your home equity loan account in a relationship with your other accounts:

• The balance in your home equity loan account may contribute to the combined minimum balance requirement.  When this minimum balance is maintained, the monthly maintenance fee for your checking account is usually waived.

• Other fees, such as check imaging or foreign ATM withdrawal, may be waived.

• You might be offered a lower interest rate on your home equity loan.

But you should also be sure to check other banks and financial institutions for low interest rates on home equity loans. It is possible that a low enough interest rate without relationship banking may save you more money in the long run than a relationship banking product with a higher interest rate. Be sure to do your research by comparing the products and rates of different financial institutions, including your own.

Other Things to Keep In Mind
When you have a home equity loan as part of your banking relationship, it is often required that your monthly payments on the loan be paid automatically from your checking account.  This may or may not be a desired characteristic, depending on your situation.  You may enjoy this feature because it takes the hassle out of making your payments; you may dislike it, however, if you prefer making payments yourself so you know when money is going out.  It really depends on your unique situation and preferences.

Always be sure to shop around for the best interest rates and payment plans. Compare all your options before making a decision so you can get the home equity loan that’s best for you.

Source: Informa Research Services