How To Refinance A Home Equity Loan

Refinancing your home equity loan is simple when using online lenders. By comparing loan quotes, you can find the lowest costing refi solution. In addition, you can save time and hassle by completing your application online. In less than two weeks, you can reduce your rates and payments by refinancing your home equity loan.

Refinancing Options For Home Equity Loans

You have a number of options for deciding how to refinance your home equity loan. The simplest method is to just refinance your current home equity loan as a second mortgage.

The other option is to refinance both your first and second mortgages to qualify for lower rates than if you just refinanced your second mortgage. You also save on closing costs by paying lawyer, appraisal, and other fees just once. In addition, the hassle of multiple applications is eliminated.

However, combining mortgages is not always the best financial choice. In some cases, refinancing separately will get you better rates. You may also save money by having different terms on your mortgages. For example, you may want your first mortgage for 30 years, but your second mortgage for five.

Start By Comparing Numbers

To see real savings on your interest and monthly mortgage payments, ask for loan cost estimates from lenders. For a quick search, look at the APR to find the lowest costing refi package.

But to get a real sense of your savings, calculate the interest cost on your current home equity loan and potential refi loan. Remember too that there is flexibility with your refinancing. You can shorten your loan to reduce interest or lengthen terms to reduce monthly payments.

Finishing The Refinancing Process

By looking online for your refinancing quotes, you have practically completed your loan application. When you receive a quote, most lenders provide an option to finish the application. This may mean submitting a request online or completing a form.

Once your refinancing has been approved and loan contract signed, your original loan will be paid off by your lender. You can start enjoying your lower monthly payments in less than two weeks.

Mortgage Information - Refinancing? Second Mortgage? Home Equity Loan? Understand The Basics

A mortgage is usually the biggest purchase that an individual makes, and because of that, many people tend to get nervous during the process. But wouldn’t it make things easier if you felt that you had a “handle” on the process—or at least the terminology? After all, in order to get the best deal on your mortgage loan, you will need to understand certain things such as points, interest rates and closing costs.

If you feel like you could stand to brush up on your mortgage loan terminology, why not read the following common terms and their definitions?

Points

A point is amount that a borrower will pay in order to reduce the interest rate on their mortgage. One point is generally equal to 1% of the loan amount. For example, if you were taking out a 100,000 mortgage, and wanted lower interest rates, you might have to pay anywhere from 1-3 points (or $1,000-3,000 dollars) to get that rate. It’s important to note that some lenders will advertise very low interest rates, and only when you read the fine print will you learn that you will have to pay points in order to get them.

Interest Rates

When a lender makes a loan, they make money by charging interest on that loan. With a mortgage loan, all of that interest is front-loaded, which means that for the first few years, every payment that you will make will go mostly toward the interest.

When applying for a mortgage, you will have the option of “locking-in,” or “floating” your interest rate. If you choose to lock-in your rate, then you will be assured—for about 60 days—that when you close it will be at that rate. However, if it appears that interest rates will go lower, you can choose to float the interest rate, which means that you can watch the rates carefully, and then lock it in whenever it reaches an amount that you are comfortable with.

Closing Costs

When you go to close on your home at the title company, both the buyer and seller will have to pay a pre-determined amount of closing costs. These are determined by the type of loan you get, and the area where you live. Your lender is required by law to inform you of any closing costs beforehand, so be sure to ask for your truth in lending estimate.

As you can see, mortgage terms aren’t that mysterious! Do some research or read some more articles on this site to become familiar with the lending terms that you need to know.

There are also many mortgage companies online that can help you find direct mortgage lenders and home loan brokers that will best suit your needs. This is a quick way to find a good mortgage loan and compare rates and offers from multiple lenders. When lenders compete for your business, it works to your advantage.

Refinancing your Home Equity Loan

If you have lived in your home for more than two years, it has probably appreciated which means that you have built up equity. What is home equity? Home equity is the difference between the value of your home and the amount of all that you owe on your home. If your home has an appraised value of $200,000 and all of the outstanding liens against it total $150,000 then your home equity equals $50,000. Often times when a home has accumulated value, the homeowner decides to take some of that value out in cash. Sometimes the cash is used to pay off bills, for home improvements or for a child’s education. One of the best ways to tap the money available from your property is to refinance it with a home equity loan.

When considering a home equity loan, there are several steps you should take to ensure you choose the refinancing package that is right for you.

· The current market for home equity loan refinancing is crowded and very competitive. As a homeowner you probably receive solicitations for loans almost daily via the telephone or the mail or the Internet. Be wary of accepting any of these solicitations without thoroughly investigating them. The best course of action might be to initiate your own independent search for a financial institution or mortgage broker. Also be aware of the fact that a mortgage broker in any loan situation is not automatically working to get you the best deal. You are the person who should take responsibility for making sure that the final loan product is the one you need. The Better Business Bureau, the yellow pages, the Internet and references from friends are all good places to start your search for refinancing your loan.

· You will need a certified appraisal for the actual loan. However, it is wise to have an idea of the value of your home before you begin the process of refinancing. There are many online services that will give you an estimate of your home’s value. Many times home sales are listed in the newspaper. Watch these listings for homes in your neighborhood that are similar to yours in size and condition. Note their prices.

· Know your credit score. By law you are allowed one free credit report a year. The credit reporting agencies that supply the report generally will also offer your FICO score for a small additional fee. There are other factors that influence your ability to obtain a home equity loan but your credit report and FICO score are good places to start.

· Once you have identified several possible sources for refinancing your loan, have the lenders explain the different loan products they offer. Don’t be afraid to ask specific questions and don’t be hypnotized by a low interest rate. A low interest rate alone is not sufficient reason to accept a loan proposal. Ask about the term of the loan and the closing costs. Make sure the lender explains any terms you may not fully understand such as points.

· Let the lenders know they are competing for your refinancing business. Sometimes a lender will sweeten your deal if there is the possibility the it might be lost otherwise.

· Have all proposals submitted in writing. Take the time to compare them and always make sure you are comparing the same types of things. For instance, don’t just look at the bottom line number on the closing costs see what each lender is including in the closing costs.

· Be alert to potential scams. Don’t be intimidated by your refinancing lender into signing anything that isn’t absolutely true. Don’t sign anything that has blanks or that you haven’t read.

· Know your rights. There is generally a three day penalty free right to cancel when you refinance your loan. If something doesn’t seem correct to you, don’t shy from invoking that right.

Refinancing your loan in order to access your home equity can be a wise financial move. Your home, however, is probably the largest portion of your net worth so proceed with caution and knowledge.