Refinancing Your Home Equity Loan - 3 Pitfalls To Avoid

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Refinancing Your Home Equity Loan - 3 Pitfalls To Avoid
Refinancing your home equity loan has its own unique temptations. You may be seduced to go for an extremely low rate loan, only to find high fees are due at signing.

Rolling loans can also suck money out of your checkbook as you keep refinancing your loan. Low monthly payments may also tempt you to delay payments, costing you hundreds. Any of the obstacles can be avoided if you know your terms before refinancing your equity loan.

1. Watch Out For High Refinancing Fees

Fees are how many lenders make their commissions. Promising low rates, they get you to start the application process before disclosing the high fees due at closing.

To avoid this problem, start by getting refi estimates on your home equity loan. Compare the APR and read up on any additional fees. Lenders are required to disclose this information before you complete your loan application.

Broker sites can get you started with several quotes, but don't be afraid to look at individual lender sites as well. Searching several lenders will help you weed out the outrageous fees.

2. Be Careful Of Rolling Refinance Mortgage Loans

Rolling loans can also zap money from your budget. Most rolling loans start with a low adjustable rate that can be locked in later with a fee. So you end up paying closing costs twice - once at the refi, and then to get a fixed rate.

The temptation is both the initial low rate, and the prospect that rates will drop in the future. Of course this is a gamble. But don't forget that you are doubling your closing costs and restarting your amortization period.

3. Keep Your Mortgage Refinance Payoff Date in Mind

Another trap is to delay your loan's payment period. With a lower monthly payment, extending your loan's terms by a few years seems insignificant. But, those years add hundreds, sometimes thousands to your interest charges.

Before getting talked into a long term loan, look at your own budget. Plan where you want to be in the future and how soon you want out of debt. With your goals firmly in mind, negotiate your terms. You may even find that a shorter term could qualify you for lower rates.

Here are our recommended Home Equity Loan companies online.

Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans.

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How You Can Get a Home Equity Loan With Credit Problems

The majority of consumers have credit problems, but they can still get a good home equity loan. With your home's equity, you can qualify for a secure loan with low rates. Start by cleaning up your credit report so it represents the best about you. Then find a home equity loan with terms that meet your needs. After that, it is just a matter of finding a lender that can offer you the best rates.

Clean Up Your Credit Report

Cleaning up your credit report can save you from paying higher interest charges. Errors are not that uncommon, especially if you have a bankruptcy or foreclosure in your records.

A quick look at a free copy of your credit report can give you peace of mind. If you do find a mistake, take it up with the credit reporting agency. It is their duty to research the blunder.

Match Home Equity Loan Terms With Your Needs

Home equity loan terms have a lot more variations than traditional mortgages. Of course you can have fixed or adjustable rates, flexibility in terms, and fee limits. But you can also take your equity out all at once or over several years. You can also waive some fees by keeping a minimum balance for a couple of years.

Naturally, the terms you pick will determine your rates and closing costs. However, choose the loan package that works best with your budget. Set a pay off date and a payment cap. Then look for a lender.

Research Lenders And Loan Estimates

With loan terms in mind, you can quickly research lender and their rates. Go beyond generic loan packages and ask for specific loan estimates based on your desired loan terms. This way you will get a more accurate quote and be able to make a better decision on your lender.

Even with bad credit, keep your options open with lenders. Traditional lenders sometimes offer sub prime lending and should be considered when you collect quotes. Broker sites can help you speed up your search process for a lender.

The best lenders will work with your credit issues and find you a reasonable home equity loan package.

See my recommended Home Equity Loan Lenders online.

Carrie Reeder is the owner of ABC Loan Guide, which offers help with loans for people with low credit scores.


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Refinancing Your Home Equity Loan - 3 Pitfalls To Avoid
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