Getting the Most Out of Your Home Equity

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Your home can serve as a source of cash.
You never know when time comes when you will need cash to pay off a personal debt, to improve your home, to pay for college tuition or to pay medical bills.
There are different ways to go about getting the cash.
You could use your home for a home equity loan where you use your home as collateral to borrow money and pay a steady amount with consistent interest rates at a predetermined time span.
You may also use lines of credit and pay varying amounts depending on what you have already paid off your outstanding balance.
Both home equity loans and lines of credit offer lower interest rates than first mortgages and are tax-deductible.
That is why these have been the preferred modes of borrowing cash.
Another way is through refinancing, which is discussed here more comprehensively, as it turns out to be more advantageous for a lot of people.
This is similar to home equity loans because you also use your equity to obtain cash.
The difference is that with refinancing, you totally pay off your first mortgage and you get cash as well, while in home equity loans, you remain in the same debt payment terms as before.
Refinancing has been the best option for others where the client refinances the first mortgage by making another loan and receives an amount equivalent to the difference between his old debt and new debt before it is foreclosed.
"Cash-out refinancing" is applicable when there is a drop in mortgage rates and a surge in the value of properties.
As an example, your house cost $150,000 when you bought it a few years ago and have paid of $40,000, you now owe only $110,000.
However, the value of your home has doubled to $300,000 since then.
You can now go for cash-out refinancing for $200,000 and pay-off the $110,000 that you owe and have $90,000 in cash.
This is only advantageous for you if you could afford paying off a $200,000-loan.
This is highly beneficial when mortgage rates have fallen since your first mortgage and now you will get a lower rate for refinancing.
Interest rates will be lower accompanied by lower monthly payments.
Using home equity loan rates or refinance for various plans and investments is always considered a low risk loan for the loan companies and this is why you will face relatively low interest rates and many tax benefits, this is also a reason for you to consider taking a home equity loan or home equity refinancing plan.
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