Home Equity Loans and Refinancing
Sometimes your home can help you restructure your debt. It
can help you lower your payments by extending the time period of
repayment, getting a lower interest rate or both.
A home equity loan can help you gain approval for a loan with
a much lower interest rate than what you are paying on credit
cards. The catch is that you must have enough equity in your
home to draw from. The better your credit, the better rates you
can qualify for.
A home equity loan is essentially a second mortgage. It
allows you to loan a much larger amount of money than you could
normally obtain if you had no collateral to guarantee the loan.
This security interest can help you qualify for much lower
rates, thereby using those funds to pay off your high-interest
credit card debt.
If you do not have a substantial amount of equity, then you
may wish to consider refinancing your current home mortgage.
This is possible if your credit score has increased since you
first closed on your mortgage loan. On-time payments on your
mortgage can help boost your score. If you have made your
mortgage payments consistently, then you may be eligible for a
lower rate by refinancing your mortgage.
The great part about both home equity loans and refinancing is that mortgage
interest is generally tax-deductible. This means you can
potentially realize tax savings when you convert your high
interest debt to mortgage debt. You should consult a qualified
tax advisor to learn more about potential tax savings of home
equity loans and refinanced mortgage loans.
Recent changes in credit scoring allow you to apply from
several lenders without getting hit with multiple inquiries on
your credit report. All mortgage applications that you complete
within a 45 day period count as only one inquiry. You are no
longer penalized for searching for the best rate on your home
equity loan or refinanced mortgage.
See
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