Home Loans and Mortgages - Time to Consolidate Loans?

Home equity loans and lines of credit are utile tools for homeowners. They allow the homeowner to borrow against the value of his or her home for all sorts of intents – home improvement, debt consolidation, vacations, and more. The loans, backed by the value of the house itself, come up with attractive interest rates and the added fillip of tax deductible interest. That interest, however, is often variable, adjusting up and down with changes in market conditions. At the moment, statuses are such as that interest rates for adjustable rate loans are increasing while rates for fixed-rate loans are still fairly stable. This is probably a good clip for homeowners with variable rate equity loans to see consolidating their primary mortgage and home equity loan into a single entity.

The ideal campaigner for such as a consolidation would be a homeowner who have a variable rate home equity loan, rather than a line of credit or an equity loan at a fixed rate. A line of credit is kind of a rotating loan, with an amount that may be drawn, as needed, clip and again, much like a credit card loan. A home equity loan would stand for a fixed amount of money borrowed for a specific length of time. To consolidate a home equity loan and a primary mortgage, the home would have got to be refinanced with a new mortgage issued for the concerted amounts of both loans. There are costs associated with this, so homeowners should see the following:

Refinancing costs – It may cost respective thousand dollars to compound two loans into one. A home assessment will be required, along with paperwork fees, filing fees, and possible points paid at closing. A homeowner should do certain that he or she will stay in the home long adequate to offset the further costs of refinancing, otherwise the nest egg of consolidation are lost.

Interest rate on the primary mortgage – If you have got financed or refinanced your home during the last three years, your primary mortgage rate may already be lower than the rate you could get today. You don’t desire to raise your overall interest rate just to consolidate the smaller amount of money from a home equity loan.

The amount of money owed on the home equity loan – The larger the amount of money owed on the equity loan, the greater the benefit of consolidation. You wouldn’t desire to refinance your home over an equity loan balance of $1000, but you might desire to make so if the balance is $50,000.

Market statuses change regularly, but now is a good clip for anyone with a variable rate home equity loan with a considerable balance to see consolidating the equity loan and the primary mortgage into a single loan. If you aren’t certain if you can profit from this, you may wish to confer with with your lender.