What is a Home Equity Refinance?

April 25, 2009 by · 3 Comments
Filed under: Blog 

When it comes time to do a home equity refinance there are several terms that you should be familiar with. Many people do not understand how a home equity loan works or even what home equity is. There are two basic types of loans you can get when it comes to home equity; an equity loan or an equity line of credit.

So what is home equity? Quite simply it is the difference between what you still owe on your home and its appraised value, or what your home is worth. Here’s a simple example. If your home is appraised at $150,000 and you still owe $50,000 on your mortgage the equity in your home is $100,000.

When you take out an equity loan, or refinance your current loan, you are borrowing against the value you have built up in your home. This type of loan will give you a one time lump sum in the form of a check that you can do whatever you choose with. You will have to pay it with a monthly payment over a set amount of months, much like a mortgage.

A home equity line of credit works a little differently. You still are able to borrow a specific amount of money based on the value of your home, but the money is not paid out in a lump sum. You can tap into your line of credit as needed, much like we do with a credit card. The nice thing about a home equity line of credit is you only have to make payments on the money you have borrowed. If you have a $10,000 line of credit and your use $3,000 to do some home remodeling you will only make payments on the $3,000. It is important to remember that just like any other loan you will be paying interest on any money you use out of your credit line.

When you are looking to do a home equity refinance loan you must realize that you are using your home as the collateral in order to get the loan. You are guaranteeing your ability to repay the loan against the value of you home. If for any reason you cannot make your payments the lender has every legal right to foreclose on your home so they can sell it to cover the value of the loan.

One of the best reasons to do a refinance your current home equity loan is to get a lower interest rate. If your original loan had a high interest rate you can save quite a bit of money if you are able to obtain a lower rate.

If you are thinking of doing a home equity refinance then do some research and get at least four quotes from reputable lenders to see which package may work best for you.

Andrew Bicknell
http://www.articlesbase.com/non-fiction-articles/what-is-a-home-equity-refinance-137408.html

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3 Responses to “What is a Home Equity Refinance?”
  1. CHRISTINA N says:
    April 25, 2009 at 3:57 pm

    Is it possible to refinance a home equity loan to be able to get a lower rate?
    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.

  2. Answer G says:
    April 25, 2009 at 8:59 pm

    Hi there,

    When it comes to refinancing a home equity loan you reall have to shop around to make sure you get the best deal. You your deciding on your option you make to make sure you get the following
    *Competive Rate
    *Lower you repayments
    * Great Customer Service

    You must not forget the last point, remember your the customer and the customer is always right !!!!

    Give these guys a go, I think you will be pleasantly supprised
    http://tinyurl.com/yqnx37
    References :

  3. robert_byrne says:
    April 25, 2009 at 9:01 pm

    Yes, it is not uncommon. A home equity loan is a second mortgage, and the process is essentially the same as refinancing your primary mortgage.

    Depending on your financial goals, you may want to consolidate your first and second mortgage into a single, low interest primary mortgage.

    This can be beneficial since second mortgages (home equity loans, HELOCS, etc) always have higher rates than first mortgages.

    However, if you are certain you want a new second mortgage, keep your credit clean, as second mortgage rates are heavily dependent on your credit score (even more so than first mortgages)

    Feel free to check out my mortgage information site (no, it's not a sales site) http://www.mortgagemystery.com/ – it containts a good deal of useful information about every aspect of the loan process
    References :
    Mortgage broker and banker, licensed in 30 states, owner of mortgagemystery.com

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