| Home Equity Loan | |
| A home equity loan is basically a loan that is borrowed against the equity of your home. | |
| Refinancing | |
| To provide new financing by discharging a mortgage with the proceeds from a new mortgage obtained at a lower interest rate. | |
Depending on your needs, either choice offers its advantages. For the most accurate analysis of your financial situation, it is recommended to see a loan officer for advice. For homeowners just looking for information, the following describes each type of loan and the advantages that each offers. A home equity loan is basically a loan that taps into the equity of the home. With your equity as collateral, home equity loans are usually considered to be secured debts. With a secured debt, the mortgage lender is taking less of a risk in loaning you the money, therefore you benefit from lower interest rates.
Home Equity Loan
Home equity loans offer a variety of flexible spending options, including making home repairs, debt consolidation, medical bill payments, or tuition for family members. An added benefit is that the interest rate charged is often tax deductible, as long as the loan is used for its primary purpose. Although a home equity loan has plenty of benefits, it’s not for everyone. When tapping into the equity of your home, you run the risk of foreclosure if you fail to make payments.
Refinancing
Depending on what you want to use the money for, perhaps a cash-out refinance is a better solution. Refinancing gives you such benefits as a lower mortgage rate, lower monthly payments, and debt consolidation. Cash-out refinancing also pays you the difference between your old and new mortgage in a large lump sum. Depending on your spending habits and what kind of debt you’re in, attaining a home equity loan could put too much at risk. If you have been living above your means and have not taken any steps towards changing, then getting a home equity loan will just put you in a vulnerable position, possibly causing you to lose everything.
For more information on home equity loans and refinancing, feel free to call us to speak to a loan officer today. Our knowledgeable loan officers will be able to help you decide which is best for your finances in just a few quick steps. Call us at 1-800-880-4202 to start saving today!
