Tips for Refnancing your Home Equity Loan

Home equity refinancing is a common occurrence in the market today. If you are thinking about refinancing your existing home equity loan, there are a few things that you will need to consider. Here are a few home equity loan refinancing tips.

Benefits of Refinancing

When you refinance your home equity loan, you will be able to take advantage of several benefits. For example, you may be able to secure a lower interest rate on your own equity loan than what you currently have. Sometimes, you will have agreed to an interest rate that is higher than what you are currently paying. Therefore, by refinancing the loan, you can save a significant amount of money on a cheaper interest rate if you time it correctly.

By refinancing your home equity loan, you could potentially lower your monthly payment as well. You could do this by taking advantage of the interest rate reduction or by the difference in the equity that you have accumulated. For example, if you have already paid down the balance of the home equity loan over the years, refinancing for only the existing balance will significantly lower your monthly payment.

Another benefit that you could potentially receive by refinancing is getting your hands on more cash. When you initially got your home equity loan, you more than likely had some use for the cash from the equity. If you have paid down the balance, you will be able to borrow more money for other purposes with a refinance.

When to Consider

Although this strategy can provide you with some benefits, you do not want to use it in some cases. One time that you might want to consider refinancing is when the market interest rates are low. Look at the interest rate on your existing home-equity loan and see what you are currently paying. If the market interest rate on a home-equity loan is significantly lower, then it might be a good time to refinance.

Another time to consider refinancing is when you have a substantial financial need to take care of. Home equity loans are a great source of funds when you have an emergency. You will be able to deduct the interest that you pay from your taxes for this type of loan. Therefore, if you have some equity left to borrow, refinancing could provide you with the cash that you need during an emergency situation.

Shopping Around

If you decide that you would like to refinance, you need to make sure that you shop around with several different home equity lenders. You do not want to immediately get a loan from the first lender that you talk to. Unless you shop around with multiple lenders, you will not know if you are getting the best deal on interest rates. Lenders will also vary greatly in the amount of closing costs that they charge. Therefore, make sure that you talk to at least two or three lenders before making a decision.

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