Use your home equity to remodel your home.
Refinancing is basically paying off your existing mortgage and replacing it with a loan with better terms. Homeowners refinance for a variety of reasons ranging from obtaining lower interest rates to adjusting the terms of payment to pulling out equity for personal purposes. It is important to be prudent when refinancing your home because both benefits and pitfalls exist. Whatever the reason to refinance, ensure that the net benefit outweighs the cons.
Instructions
1. Determine the factors that influence home refinancing. One of the main factors is the new interest rate, the lower the better. A good credit rating also influences the amount of money you can qualify for, as well as the terms, such as interest rates. Finally, closely look at the closing costs and administration fees from the lender.
2. Identify the most appropriate mortgage loan type for your needs. The main home loan types are adjustable rate mortgage (ARM), fixed rate mortgage (FRM), balloon home loan, home equity loan, and a line of credit. The ARM's interest rate changes through the life of the loan and is most favorable if you anticipate that interest rates will remain low or drop. The FRM has a fixed interest rate for a set period of time and is useful for someone with a fixed budget. The balloon mortgage rate may be as low as that of the ARM. Note that due to its rigidity, a balloon mortgage's major disadvantage is that once the set period of years has lapsed, the mortgage is due in full. A home equity loan is a fixed rate loan that permits the homeowner to tap into the home's equity. This may be the best option for one desiring to remodel, invest in shares, etc. Monthly payments on this never vary since the annual percentage rate (APR) remains the same for the span of the loan. Finally, a line of credit loan permits the homeowner to draw on the mortgage balance. You can thus tap into the equity of the home and make interest-only repayments. Lines of credit have lower interest rates than credit cards and personal loans.
3. Pick the best mortgage broker. One way to know if your broker is in good standing is to contact the American Association of Residential Mortgage Regulators (AARMR) and National Association of Mortgage Brokers (NAMB).
4. Discuss with the mortgage broker the final steps: signing contract documents, for example.
Tags: home equity, interest rates, interest rate, your home, balloon mortgage, equity loan, fixed rate
