Home Equity Refinancing Loan

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The Benefits and Downsides of a House Equity Refinancing Loan

A house equity refinancing loan has numerous advantages to the person who is looking to refinance their property. These loans are often called second mortgages and therefore are really helpful when the house needs a brand new roof, the kitchen needs refurbishing or the carpeting needs replacing. Perhaps you’ve got other debts and this is the only way it is possible to pay them. Sometimes you will take a home fairness refinancing loan because they believe its the only way they will find yourself getting the opportunity to go on getaway. Any of these reasons are usually viable reasons, however, you must be certain that whatever you take the loan for is worth it as you will now be having to pay two monthly mortgage repayments.

The interest on a residence equity refinancing loan is tax deductible about the first one impeded thousand dollars. This can be nice perk when you’re thinking about the costs associated with taking this loan. The closing costs, that means what the documents will cost you, is no more than a few hundred dollars, which is significantly less than that of a first mortgage. First mortgage forms can cost two or three 1000 dollars.

There are some downsides to taking out a house equity refinancing loan. Typically the interest rates of these types of loans are increased then those for any first mortgage. There may be as much as a two to three percent difference. Once the money is in your hands you must commence to pay it back immediately. This can be no break moment before payments commence. There will be no plans to choose from on payback. It will likely be a fixed loan. If you pay against the loan the monthly payments adjust to the difference within capital owed. They do not drop payments from the end, they just reduce what you pay monthly.

If you have decided that getting a home collateral refinancing loan is what you are likely to do, no matter the disadvantages, then be sure to check around before you sign anything. There are numerous financial institutions and its really worth seeing which one will provide you with the best deal.

Comments: 25

  1. Sonja January 27, 2013 at 12:52 am Reply

    We’re presently purchasing the house on the land contract. Are we able to obtain a home loan on the house while still around the land contract or do we must hold back until we re-finance it the coming year?

    We do not intend on you get one. We’re just curious.

  2. Morgan January 31, 2013 at 2:46 pm Reply

    I’m thinking about buying a good investment property with 100% cash. I’m able to buy the property at 60% of market price. Then i intend on tugging financing out for 60% from the market price. Will it be considered a home loan or perhaps a home loan? A home loan presently is all about 300 basis points less than the home loan. I’m wishing it might be considered an initial mortgage because it wouldn’t be considered a second lien position. Thanks

  3. Virgina April 4, 2013 at 2:31 am Reply

    I bought my home 4 years ago, and it appraised at $101,000. I bought it through a mortgage company, on a 30 year loan. Now that I can afford to pay a little more I’d like to redo my loan, and add my car payment on with it on a 15 year loan. The problem is that the mortgage company had a stipulation that they got to do my 2nd and 3rd mortgage, which they want to charge thousands of dollars in fees to do. Can I go through my local bank and do a home equity loan using my house as collaterol, and pay of the mortgage company?

  4. Rosy April 17, 2013 at 5:22 am Reply

    I have 2 payments to my lender that were 31 days late (30+ gets reported). I have tried talking to managers on the phone, writing a professional letter, and offering to guarantee that I refinance my loan with them when my interest rate fixed period ends in a year, and they simply refuse to help me. I am trying to get a home equity line of credit to do some home repairs, and I am finding it nealy impossible to do so with 2 recent mortgage lates. My LTV of over 90% doesn’t help things, but if I could get those 2 lates removed, I’d qualify for loans that go up to 100% LTV. If anyone has any ideas or suggestions as to what I can do to try and get those lates removed, I’d greatly appreciate it. Thank you, in advance, very much for your time.

  5. Jillian May 30, 2013 at 8:48 am Reply

    I have a owner occupied Multifamily 4 unit that i purchase for $170,000 and it is appraise by the town at $260,000. i want to purchase another multifamily but i need like $60,000 to put down, so should i refinance the loan for $230,000 (its new Appraised value) or get a home equity for $60,000. i have great Credit and Income. Which could i get a better rate and pay less $$$

  6. Vance June 13, 2013 at 8:47 pm Reply

    My parents took out a home equity loan on their home 7 months ago and didn’t quite understand what they were doing. They are on a fixed income and now have a payment they can not afford. Their home was appraised at 108,000 and they took out 35,000. They owned their home with no payments before this. They have fallen behind on payments and need to refinance the loan. but with todays market I’m afraid that won’t be possible. any ideas?

  7. Viki August 30, 2013 at 8:21 am Reply

    my home equity loan interest is too high and is to be paid for 10 more years, the amount still owed is $16000 is there any way I can get any other loans?

  8. Damion September 4, 2013 at 12:44 am Reply

    Finacing / refinacing rules are so much out of line that one who has million in home equity and more in investments cannot refinance a mere $300,000 Mortgage loan if he is retired and has fixed income. Why?

  9. Wei September 8, 2013 at 11:11 am Reply

    I bought a house 6 months ago before I sold my condo. I borrowed the money from my brother for the new home until the condo sold. I have a written contract and have been paying interest. He is starting to get nervous, so I would like to take out a mortgage for the home to pay him back. Would this be a refinance or a home equity loan? Also, when the condo sells, I expect to still have a mortgage of about $40,000. Assuming I take out a new mortgage now on the house, when I pay 3/4ths of the loan amount off in one lump sum, will my monthly payments decrease or will the monthly payment amount stay the same, but the loan be paid off more quickly?

  10. Mario September 10, 2013 at 10:29 pm Reply

    I am planning to refinance my home mortgage for a lower interest rate. What are the pros/cons for consolidating my home equity loan into my new mortgage loan? My current interest rates for both loans are quite a bit higher, however I am a bit reluctant to stretch out my home equity loan into my new 15 year mortgage when I could pay it off quicker separately. Anybody have any financial wisdom to share to help in my decision making?

  11. Digna September 18, 2013 at 10:04 am Reply

    My husband and I have always had perfect credit until a business failure 2 years ago. We had to file for bankruptcy (it was discharged 1 year ago). Does anyone have names of reputable lenders willing to do a small loan — maybe $2,500? We have been almost a month behind on our mortgage for a year now and I can’t seem to catch up. Also, part of the $$ would be for a down payment on a car. We would try to refinance or get a home equity loan but due to the fact that it is a manufactured home (on 5 acres) lenders seem to turn up their noses on us — especially since our credit ratings have suffered due to the BK, etc. Any suggestions?? Thanks – linbad

  12. Lenard October 3, 2013 at 11:36 pm Reply

    I have a mortgage & home equity line of credit with the same lender. The rate on the equity loan is currently 2.5% (prime – 3/4). I was thinking of refinancing my mortgage and taking out a little cash to pay off some credit cards. My question is, if I refinance my mortgage do I have to pay off the balance on my home equity loan?

  13. Jocelyn November 5, 2013 at 2:49 pm Reply

    I am thinking of refinancing and Chase Bank is ready to give a 10 yr 170k home equity loan. Is this a better than my existing home mortgage loan. Is there anyone who has suggestions for this.

  14. Heriberto November 13, 2013 at 6:52 am Reply

    he did not do a walk through of our home when he came out to appraise it. How could he possibly know what it is worth if he didn’t even bother to look inside?
    is this legal? the place that sent the guy out is the same place that we did our home equity/refinance loan through.

  15. Julia November 13, 2013 at 11:28 am Reply

    I have 24 years left on 30 year mortgage. I am thinking about a home equity loan at a favorable rate, rather than roll in to refinance consolidation. If rates are favorable later this year i may like to refinance 1st mortgage at 15 years. Will home equity loan affect my refinancing even if i am not looking for any cash out.

  16. Iris November 19, 2013 at 2:14 am Reply

    I owe $$ on my student loans. I received some information about refinancing which sounds pretty good. Does anyone have any advice on this? What are the advantages and disadvantages of doing this?

  17. Kylee December 23, 2013 at 4:48 am Reply

    We are $20,000 in debt with health care, credit cards, and student loans. We have $70,000 in home equity so far. Could we refinance our home and pay these outside debts?

  18. Charlott December 23, 2013 at 5:01 am Reply

    Just wondering if anyone had any information about being able to refinance a home equity loan to receive a lower rate and if so, how to go about doing that.

  19. Arletha February 2, 2014 at 10:54 am Reply

    Okay I know that without specific numbers no one can really answer this question. But I just want to know how much more a monthly mortgage payment will be if a home equity loan is taken out for home repairs. Here is what I know so far: The house is appraised for 208,000. I dont know what the original down payment was or how much the original mortgage was for but I’m just going to guess 188,000. There have been 60 monthly payments of 1400 per month on I am assuming a 30 year loan. I don’t know what the interest rate was, but they want to take out a home equity loan of 18,000 to 28,000 for home improvements. If anyone can help me figure out approximately how much more the monthly mortgage payments would be that would be great. You can email me if you need any more info that can help.

  20. Codi February 2, 2014 at 1:22 pm Reply

    I am engaged to a man who is currently tied into a house with family members. before he met me he agreed to move in with them to help pay the mortgage until they had enough equity in their home to refinance and get a lower rate. I know that they put approx 10K down and that the house was around 300,000k. The payment is approx $2300 – $2500. I am wondering how long and in this market it will take for them to build enough equity to refinance. The house is in CA in a suburb in a good family neighbohood. Any info would be great as I have no idea about this stuff, thanks.

  21. Guadalupe February 12, 2014 at 1:11 am Reply

    Hi All,
    I have a 5 yrs term mortgage that I got 2 years ago for a 4-plex I purchased. Last month I contacted an appraiser who appraised the property. Based on the appraisal the property is worth around 100K more than purchased. This means I can apply for refinancing and potentially take out some equity from the house.

    HERE IS MY DILEMMA:
    The mortgage is with excellent conditions – good interest. I got it through a mortgage broker with a big bank in Canada.
    I have 2 options for the purpose of refinancing: either contact the bank who provided the mortgage directly OR apply through a mortgage broker who can decide to work with different banks.
    The problem with going with a mortgage broker is that he already told me the new conditions will be worse than current conditions I have. If the current bank approved my refinancing application it would be with the same or better conditions! On the other hand, if I go with the current bank am I not taking a RISK THAT IF THEY DO NOT AGREE to refinance the property because I do not meet their criterias (I am self employed now), then they will also NOT automatically renew my mortgage in 3 years when term is over!? Note: if I do not contact them now, then my understanding is that the bank will automatically renew my mortgage since that is the law in Canada: as long as you pay all your mortgage payments on time, the mortgage is renewed automatically without the need to re-apply/go through the application process again!
    I’m just not sure if I contact them now for refinancing and fail, that they will not keep record of my new ‘bad’ information (i.e. self employed, less stable, etc. whatever caused them not to approve me) and NOT automatically renew my mortgage when the term is over!

    BOTTOM LINE I DO NOT WANT TO LOSE TWICE – ONCE NOT BEING APPROVED BY THE GOOD/BIG BANK NOW, AND SECOND DAMAGE MY CHANCE TO BE AUTOMATICALLY RENEWED IN 3 YEARS.

    THANKS & REGARDS.

  22. Camilla February 14, 2014 at 2:37 am Reply

    I bought my home in 2007, it was built Oct 2007. I paid 123,400 for it. The home is worth 174,000 (appraised last week) and I wanted to know what would be the best solution for me. Also, the kicker, I am in between jobs right now. I have up to $9,000 if I need it for anything that involved refinancing or fees that come up, but I do not have stable income. I am living off of savings and renter income (and loving it!).
    I would like to make improvements to the home and pay off some CC bills from the equity. What would you suggest? If you have any questions I will answer them in the edit section. Thanks

    I am in Austin TX. The home value went up and I made no improvements…it was just built in an up and coming part of town (5 minutes to downtown).

  23. Jesica February 22, 2014 at 1:45 am Reply

    We are currently working on improving our credit but our scores are still poor. The average of our score with all 3 major credit bureaus is around 580 with our highest score 603 and lowest 560. Our house is paid off in full and is valued around $135000. Is it possible to get a loan with our credit score? We do not have any major debt. We do have a credit card that we are using to help improve our credit score which we pay off every month. The only other debt we have are some medical bills. My wife and I both work and we gross around $7000 a month. We are hoping to find a loan so we can help with medical bills due to our child who has a disability and to get him the extra educational help he needs.
    I’m know if we could find a lender that would approve us we would be paying a high interest rate due to being high risk. But with us having our house paid off would we still be able to find a lender?
    Thank you all in advance for your help!
    I am a veteran so I am eligible for a va loan. I’m not sure if that will make a difference or not.
    We are in our mid 30’s so a reverse mortgage is out. We are only wanting around $25000 give or take. We do not plan on selling our house. We make a decent income, just want some to pay off a few medical bills (about $3000) and want to put the rest in savings for help with our son and a buffer. We plan on doubling up on payments also. We are just kind of in a bind right now. Also the loan will help get our credit back on track. The one thing that is hurting our credit right now is we don’t have much for credit. Our vehicles are paid off. Our credit was hurt due not being able to work for awhile and got behind on bills so we had late payments. Was just hoping someone knew if it is possible to get a loan with that low of a credit score with a house that is paid off.
    Thank you for the answers!

  24. Vance February 22, 2014 at 6:09 am Reply

    So we just bought our house a year ago and I never realized you could have your property taxes paid thru your mortgage (my realtor never informed me of this or our lender) and so now along with a big house payment (our house cost $530,000) and plus we have to pay these huge property taxes twice a year, it’s killing me!! So should we or can we refinance to include that cost? Also, can you put a car payment into a refinance (my friend said they knew of someone that did that). Thanks in advance!!

  25. Karleen March 11, 2014 at 3:09 pm Reply

    With prime rate continually decreasing would it be wise to refinance my mortgage. Just bought the house in July and my rate is decent, but over time a decrease would help.

    Does it affect property taxes? Will I pay closing cost? Lower monthly payment?

    What would be pros vs cons?
    Thanks! I’m with Countrywide and they sent me to a mortgage broker (?) she said that to have no closing cost or points the rate wouldn’t be the lowest b/c they have to pay for title work etc. I hve no prepayment penalty either.

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