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Refinancing Your Mortgage Or A Home Equity Loan - Which Is Better?
By Joseph Kenny
When it comes time to get the money you need to renovate your home, you have some choices to make concerning the financing of it. Both ways, either refinancing your first mortgage, or a home equity loan, will give you access to your equity. After that, though, a number of differences will clearly stand out. Here is what you need to know about these differences so you can intelligently choose the best one for your needs.
Features Of Refinancing Your First Mortgage
By getting a cash out mortgage, you can replace your first mortgage and obtain your equity. This means that you will have to pay the fees again that you paid when you bought the house in the first place. However, if you wait until the interest rates are down, you can get a better deal than you had before. The amount that you can gain could easily offset the costs of refinancing and save you thousands of dollars over the life of the new mortgage.
The interest rate for a first mortgage is always lower than what you would get for a second mortgage - which makes this the ideal choice. You also will have only one payment each month, which you could even make lower than what you have now by extending the time length on the mortgage. If you already have more than one mortgage, then this is also a good way to consolidate them and get your equity at the same time, as well as reduce your monthly payment.
If you currently have an adjustable rate mortgage that is about to run out of the fixed rate portion, then this should be the way you would want to go. Not only will it give you level payments with a fixed interest rate, assuming you get a fixed rate mortgage, but also your equity for the upcoming renovation project you have in mind. This means you could take care of more than one problem at once.
Features Of A Home Equity Loan
A home equity loan is considered a second mortgage. This means it will give you an additional payment each month. If you can afford the extra payment, this may be the way you want to go. It will also have a higher rate of interest than a first mortgage, and usually has a time frame of up to 15 years for repayment.
You can take out your equity but need to leave enough in there that is equal to 20% of the value of the house. This is true with any kind of mortgage, since you may need to pay private mortgage insurance if you go over this amount.
A home equity loan is mostly fixed rate, but some may also be adjustable. Your loan payments are fully amortizing, and money used for fixing up your home is often tax deductible. This type of loan is seeing some new variations come out recently, so you will want to see what is out there before you choose.
The Choice Is Yours
Obviously, only one of these choices will best meet your needs. After you choose a course to take, you will then want to get a few quotes - whether you choose to refinance, or get a home equity loan. You will need to look them over carefully and consider all aspects in order to find the one that is best for you.
Joe Kenny writes for Rebuild.org, offering home refinance, and also if you are looking for a new home loans
Visit today: Loans with Rebuild.org
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Equity Home Loan Refinance News
More looking to refinance home loans with lower interest rates (Channel NewsAsia)
SINGAPORE : More people are looking to refinance their home loans in the past few months with lower interest rates, but not without difficulties.
Read more...Loan Delinquencies Hit Record High Last Year (Washington Post)
Delinquencies on auto loans and home equity lines of credit reached their highest levels on record during the third quarter of 2008, the American Bankers Association reported yesterday.
Read more...Go beyond rate when weighing refinance (Bankrate.com via Yahoo! Finance)
Dr. Don Taylor says you should look beyond current mortgage rates when deciding whether or not to refinance.
Read more...Is It Time To Refinance Your Mortgage? (Forbes)
Falling rates and a friendly Fed mean good things for homeowners. But there's a catch.
Read more...Cardoza submits plan to refinance mortgages (Merced Sun-Star)
Rep. Dennis Cardoza proposed a bill Wednesday to have the government refinance mortgages for all homeowners in an effort to stop foreclosures, put more Americans in homes and jump-start an economy in recession.
Read more...Lenders Backlogged By Refinancing Rush (Washington Post)
Borrowers are rushing to refinance their mortgages at record low interest rates but face unexpected delays as swamped lenders struggle to cope with the surge at a time when layoffs have sharply cut staffing.
Read more...Fit to refinance? (Hutchinson News)
Edward Johnson is not new to mortgage lending. The First National Bank executive vice president and ...
Read more...Now is a good time to refinance (Ravalli Republic)
Plunging interest rates over the past month have prompted many homeowners in the Bitterroot Valley to look into refinancing, local lenders say.
Read more...Borrowers may get break; savers' suffering to worsen (The Sacramento Bee)
What does the Fed rate cut mean to you with a mortgage, car loan and credit cards? You could be a winner if you have a home equity line of credit. But if you've socked away money in a savings account, you could be a loser. Generally, though, it takes a while for the average person to see any effects at all. That's because even though cuts in the federal funds rate eventually tug most ...
Read more...Those who can find time right for refis (Lake County Journals)
The Federal Reserve’s decision last week to cut a key interest rate has sparked a stampede to lenders by customers eager to refinance or buy homes on the cheap.
Read more...