10 Things You Need To Know Before Getting A Refinance Or Home Equity Loan
Refinance loans and home equity loans both give you an opportunity to get cash when you close on the loan. While both options can be a great way to save money and get money, there are certain things you should know before getting a refinance or home equity loan:
You Need a Good Reason to Get a Loan
It doesn’t matter if you are considering a refinance loan or home equity loan; you need to have a good reason for spending the money it will take to close on the loan. Good reasons may include the need for a better rate and terms or the need for cash to consolidate debt or pay other outstanding bills. Whatever it is, make sure the loan will save you money in the long run, and more importantly, make sure you can afford the new loan payments.
Refinance Terms Vary
Not every refinance loan is the same. Some have lower payments during the term and one final balloon payment at the end. Some terms last 30 years, while others only last 15. If you will be getting a refinance loan, make sure the terms will be manageable for you.
Home Equity Loan Terms Vary
Like refinance loan terms, home equity loan terms can also vary. Some loans are adjustable rate options, while others are fixed. Term lengths can also fall all over the map, so it is a good idea to evaluate all of the options available to you before making any final decisions.
Introductory Rates Can Be Misleading
Sometimes known as “teaser rates”, introductory rates look good on paper, but can be very misleading. Before being drawn into a loan with introductory rates, you should have a clear understanding of when the rate will adjust, what the rate cap is, and what your payment might be at its highest.
Fees Need to Be Compared
When most people are looking for a refinance or a home equity loan, they compare interest rates. While this is a smart thing to do, interest rates aren’t the only thing that should be focused on in the comparison process. Because lending fees and closing costs can vary from lender to lender, you also want to take time to make comparisons between these variables.
Loan Interest Isn’t Always Tax Deductible
Contrary to popular belief, the interest paid on a home equity loan or a refinance loan isn’t always tax deductible. Before automatically assuming that you will be able to get tax savings, you should speak with a qualified accountant. An accounting professional will be able to look over your situation, as well as the potential loan to determine whether or not you are eligible for tax deductions.
There is No Such Thing as a Free Loan
Don’t be fooled by lenders who offer no closing cost refinance loans or home equity loans. There is no such thing as a free loan. If you don’t pay the costs upfront, you will pay for them later on in the loan. While this may not seem so bad, you need to remember that you will also be paying interest on anything not paid upfront.
Negative Amortization Loans are Risky
Though they are not as popular as they once were, negative amortization loans are still offered by lenders. These loans present a great risk to the borrower because loan payments aren’t always enough to cover the required interest payments. Any unpaid interest will be added to the unpaid principal, making it very difficult to pay the loan off in a timely manner.
Tax Assessment Aren’t Genuine Appraisals
If you are thinking about getting a refinance loan or home equity loan, don’t assume that the local tax assessor’s appraisal represents the actual market value of your home. Tax assessments aren’t genuine appraisals. Your home may be worth quite a bit more or quite a bit less than the amount indicated on your tax assessment. The only way to find out how much your home is really worth is to contact an independent real estate appraiser.
You Can Back Out
Federal law gives you the opportunity to back out of a refinance loan, a home equity loan, or any other type of loan that will be using your home and property as collateral. You have a total of three days to change your mind after the loan has closed. If you are unsure about the loan for any reason, this window of opportunity is your chance to get out before it is too late.
CL Haehl
http://www.articlesbase.com/finance-articles/10-things-you-need-to-know-before-getting-a-refinance-or-home-equity-loan-102259.html
I need to refinance.?
Ive been searching for 2 months to find a company that will refinance my home in the next 2 months. I know the market sucks right now but that doesnt mean that im willing to pay someone 8k just to refi my house. I owe 450k on my house and I have about 160k in equity. Im now single and my so called husband (soon to be ex) deeded off the property a year ago. My credit it now around 650 and everyone Ive talked to have been trying to get me into paying 8-11k in fees alone. I need to lock me a fixed loan before this thing adjusts. Please only respond if you have a proven source. Im desperate.
Reality, if you have not found someone to do it in the last couple of months then now will be even worse.
I suspect you are also looking at an awful rate too. You may have no options but to pay that 8K to lower the payment to where you can afford them. The fees SOUND about right for that amount of loan.
You are also in the jumbo market, even worse.
If you want even more problems then respond to one of these jackasses who do not even know how to read!!
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if in California, call Jess Mendoza
714-264-5890
He does all of my loans….and never charges more than 1 point (i.e $4,500) but more typically is No Points and No Costs.
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you’ll probly come out with a lot higher pmt just from the intrest rate and the fees with a 650 every time you apply some wher your score drops a couple points
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I don’t know where you are located, but there are ‘no point/no fees’ loan brokers out there. The interest may be a little higher, but you don’t add to your loan amount borrowing through them.
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