Refinancing Your Mortgage Or A Home Equity Loan Which Is Better

Refinancing Your Mortgage Or A Home Equity Loan Which Is Better



Refinancing Your Mortgage Or a​ Home Equity Loan - Which is​ Better?
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.




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