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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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Fixed Rate Home Equity Specific links
Fixed Rate Home Equity News
Fixed Mortgages at Lowest Rate in Decades (New York Times)
Rates on 30-year fixed loans fell for the 10th consecutive week to the lowest levels in decades, but it is not clear if it is enough to lure homebuyers back into the ailing house market.
Read more...CORRECTED-UPDATE 2-US mortgage rate drops 10th week, to record low (The Forex Market)
NEW YORK, Jan 8 (Reuters) - The average interest rate on 30-year U.S. fixed-rate mortgages dropped to a 38-year low of 5.01 percent in the latest week, after the Federal Reserve launched its mammoth plan to lower home borrowing costs, Freddie Mac said on Thursday.
Read more...Fewer apply for home loans; credit line delinquencies increase (Los Angeles Times)
The average interest rate for 30-year mortgages rises, while rates for 15-year and adjustable-rate loans fall. Fewer Americans applied for mortgages last week and more have been missing payments on their home equity lines of credit, according to surveys released Wednesday.
Read more...Mortgage rates head toward record low (Bankrate.com via Yahoo! Finance)
The 30-year fixed-rate mortgage fell 31 basis points, to 5.33 percent, in Bankrate's weekly survey.
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...Refinancing suddenly booms (Honolulu Advertiser)
Historically low interest rates recently have sparked a mortgage refinance boom in Hawai'i that is helping homeowners and lenders during difficult economic times. The national average interest on a 30-year fixed-rate mortgage last week dropped to 5.10 percent, with an average 0.7 point purchase cost, according to a survey by Freddie Mac, which said the rate hasn't been lower since the survey's ...
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...(AFX UK Focus) 2009-01-09 02:09 CORRECTED-UPDATE 2-US mortgage rate drops 10th week, to record low (Interactive Investor)
By Al Yoon
Read more...Bankrate: Mortgage Rates Flirt with Record Lows (PR Newswire via Yahoo! Finance)
Mortgage rates fell sharply in the first week of 2009, with the average 30-year fixed mortgage rate plummeting to 5.33 percent. According to Bankrate.com's weekly national survey, the average 30-year fixed mortgage has an average of 0.39 discount and origination points.
Read more...Sean O'Grady: Rate cut puts Britain in uncharted waters (Independent)
The UK economy embarked on uncharted waters after the Bank of England cut interest rates to their lowest in its 315-year history. The half percentage-point reduction to 1.5 per cent is lower than anything seen during the course of two world wars, the Great Depression, the Napoleonic Wars, countless stock market crashes and the rise and fall of the British Empire.
Read more...