Unlock Hidden Cash In Your Property With These Simple Home Equity Loan Tips

What is a home equity loan?

A home equity loan is a loan that you take when you want to release equity from your home without needing to sell it. You may need the money to boost your retirement income, to finance a major purchase or project, or simply to consolidate other debt.

What kind of home equity loans are out there?

There are two different types of home equity loan. The first is a Cash-out Refinancing Loan and the other a Home Equity Line of Credit (often abbreviated to HELOC).

What is a Cash-out Refinancing Loan?

When you take a cash-out refinancing loan out you use the loan to pay off any sum outstanding on your original mortgage whilst releasing some of the equity you have built up in your home. Here’s an example of how this works:

• Your home today is worth $200,000
• You would like to release $50,000 of home equity
• You owe just $40,000 on your original mortgage

In this scenario when you refinance you are refinancing the $40,000 that you still owe on your mortgage plus the $50,000 of home equity that you want to release. So in total your cash-out refinancing loan would be $90,000.

The cash-out refinancing loan becomes your new and only mortgage. The loan can be made on a fixed or adjustable interest rate, and the terms of the mortgage will be a completely new set of conditions. The home equity that you release will be paid to you in a lump sum.

How much do I have to pay for a cash-out refinancing loan?

The costs associated with this kind of loan are closing costs just as with any mortgage. The closing costs can run from the hundreds to the thousands depending on how large the mortgage is.

Is a cash-out refinancing loan always the best option?

You should choose a cash-out refinancing loan only if you can secure a lower interest rate than you had on your original mortgage. If this is not the case, you should consider a home equity line of credit.

What is a home equity line of credit loan?

A home equity line of credit loan is a loan that you take in addition to any existing mortgage under a separate loan agreement. Based on how much equity you have in your home you will be able to release an agreed amount of equity. This is made available to you as a line of credit rather than paid to you as a lump sum. A loan of this kind is usually available on a fixed or a variable interest rate. With this kind of loan there is no closing cost, so in that way this kind of loan might seem a better deal - however the interest rate on this kind of loan is often higher than it will be for a cash-out refinancing loan.

Where can I find out about these home equity loans?

All of the major banks and lending institutions offer these loans. As always we strongly recommended that you do plenty of research to secure a loan with the best possible terms for you. You specifically want to look for the lowest possible interest rate.