People take out equity mortgage loans, and refinance them, for a variety of reasons.
Looking at equity loans from an entirely positive perspective, consider a situation where you have an opportunity to expand your business or invest in a new own.
You have a good life and live in a place that suits your lifestyle perfectly.
You don't want to cash in retirement funds and have a lot of equity in your home.
You are in the best possible position to take out an equity mortgage loan.
Nothing changes in your life other than you do have a new mortgage with a new payment.
Oh yes, and you have a lot of liquid assets you can use for your new venture.
Since we are looking at the upsides of equity mortgage loans here are some more positives.
When it comes to refinancing equity mortgage loans, in particular, chances are that you will be able to get it at a great interest rate.
Home equity is quite appealing to the lenders.
Second mortgages often fall into a category where the interest you pay on that loan is tax deductible.
The interest rate is not only potentially tax deductible but more than likely has a lower interest rate than a regular personal loan or a credit card.
There are no surprises either with an equity mortgage.
You can use your equity loan for anything.
It is not like a loan you get where the purchase is the security for the loan.
Your equity is the security and how you spend the money from your equity is entirely up to you.
And for the final bonus of home equity loans, there is always the possibility that your home will increase in value and the equity you had left in it, after the mortgage equity loan, will increase.
Oh wait, there is even another bonus you can maximize if you wish.
You can even sweeten the deal by getting your equity loan as a line of credit.
Heck, while you are at it, you can even use the lower interest rate to pay off your higher interest credit cards and loans.
Thinking about refinancing your mortgage equity loan? If you decide to refinance your home equity loan, here is a checklist to help you focus your mind on the decision.
o Home equity loans typically come with a fixed interest rate which is often higher than a regular fixed-rate first mortgage.
o Refinancing your mortgage equity loan may have a slight downside in that it means you are refinancing something that you have already financed as a backup to your first mortgage.
This is a bit of a stretch and can be overcome if it improves your finances in a sensible manner.
o If home values drop, the value of your equity will not be sufficient to meet the bank's security for you loan and you will have little or no leeway for future loans.
o Will you have a better interest rate? o Do you plan to keep on living in the same house? If you are going to sell in the next year or two, you may not have much to gain in the sale.
This will not give you much to put into a new home.
o Is your credit rating good? The better your rating, the better your interest rate.
Make sure you are not exchanging a current good rate for a higher rate.
o What will your monthly costs be after refinancing your equity mortgage? Don't forget to consider the closing costs that might be involved in refinancing.
o Will refinancing reduce your monthly payment or can you use it to reduce the overall number of payment you have to make? o Can you change the length of your loan? If so, can you make it longer or shorter? o Can you cash out some of your home equity? o Can you switch to from an adjustable rate mortgage to a fixed rate mortgage (or vice versa)? Do you see any advantage in switching, if you can? o Have you done your research on what is available for refinancing your equity mortgage? o What are the closing costs? o Are the closing costs justified by the amount being refinanced? o Will your refinanced mortgage be bigger than the original equity mortgage? o Why are you refinancing?