Home Equity Loan

Home Equity Loan And The Refinance Plan

The equity question...

What will you do with all that home equity you've been building up over the last few fears?

• Depending on your mortgage, you may have paid a lot toward your mortgage principal, meaning all that amount you've paid off is strictly and irrevocably home equity - or maybe not, many ARMs today use interest only clauses that ignore the loan principal.
• Or, taking a quick glance at home appreciation rates, if you live in the right area you don't have to worry about making equity, it happens on its own!

With that equity you can take out a home equity loan for any financial reason you see fit: debt consolidation, home improvements, major outside purchases...refinancing.

Using a home equity loan to refinance your mortgage

Lets say you are one of the 50 million lucky few who live in California, and even more lucky you own your own home. You've lived there about five years, and over that time your home's value has increased - on average - by 99.86%. That means if your home was valued at $200,000 when you bought it, its the same home but costs $199,720 more - you have that much in equity and that much available for a home equity loan - even more when you run with certain refinancing circles such as the Countrywide home equity loan. If your original mortgage still has $100,000 left on it, and you're paying a 9% fixed rate, you can use that equity and todays low home equity loan rates and take out a home equity loan that will refinance your property at a lower, more affordable interest.

Ok, but why would you want to?

Home equity loans carry higher rates that first mortgages, and the rates attached to a home equity loan are usually higher than if you simply looked for a refinance. However, unlike your first mortgage and unlike refinancing opportunities, a home equity loan will care less about your credit history and financial standing and more about the amount of equity you have in your home vs. what you are taking out. If have bad credit or face tough financial times, and you've built up over $200,000 in equity and need a $100,00 fixed rate home equity loan, you'd better believe you will get a competitive rate. You will also avoid the refinancing fees which are traditionally much higher than equity financing costs.

No matter how low your quoted home equity loan rate, we're almost certain you will find a better deal in a traditional FIxed Rate Refinance - especially if you are at the point where equity refinancing makes sense.

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