Home Equity Mortgage Refinancing

As a homeowner, are you aware of your mortgage refinancing options? One of the advantages of earning equity in your home is getting the option to:

• Refinance your mortgage
• Cash-out your equity
• Take advantage of lower interest rates

What is an equity cash-out?

Equity is simply the cash difference between the appraised value of your home and the outstanding balance on your mortgage. When you “cash-out,” you’re just refinancing your first mortgage with a larger 2nd mortgage and keeping the difference as either a:

Loan: a set amount that you pay back over a predetermined period.

Home equity line of credit: a typically low-interest amount of credit that you’re able to use whenever and however you want.

In either case, whether your cash-out would go toward home improvement, to pay college tuition or to
consolidate debts, your home equity is a resource that’s waiting to be tapped.

Borrowing against your home equity can provide you with:

• Lower interest rates than you'd pay on a traditional personal loan or credit card.
• Unlike the interest paid on a credit card, car loan or personal loan, the interest paid on equity loans is usually tax deductible.

How Do I Get a Home Equity Loan?

Home equity loans are available through most reputable banking institutions. And the larger cash amounts they make available to borrowers have made them pretty popular. Because your home will be your collateral, most lenders will be willing to lend you larger sums than you might otherwise be eligible for.

Even taking fifty percent of the cash out of $150,000.00 mortgage would leave you with $75,000.00 for home renovation, paying down credit debt, college tuition, medical bills or whatever else you might need.

But, as with any other loan, home equity refinancing should be considered both thoroughly and cautiously before it can be properly taken advantage of.

Is a Home Equity Loan or Line of Credit Right for Me?

1. Should I cash the loan out as a lump sum, or in installments? If you need the money to pay for something off at once, like medical bills or to put in a new pool, a home equity loan will probably be the best fit. If you need the money to make college tuition a little easier on your budget, a home equity line of credit might be better for you.

2. Will I be using the Money on Something Long-Term, or Something Short-Term? If you’re planning to buy a new roof, an equity loan would be better suited to it. If you need to pay for a wedding reception, a home equity line of credit would probably be a better fit.