The Finance Blogger


Home Equity Loan Refinancing

Home Equity Loan RefinancingOur latest question was about home equity loan refinancing. The reader wanted to understand how refinancing worked and other information such as costs and how much they could borrow. They have an excellent credit rating and the reader is self-employed. The equity they have in the home is approximately $90,000 and they have a current mortgage of $15,000. They are in a very good financial situation and great candidates for refinancing.

This reader appears to be a perfect candidate for a home equity loan refinancing package. They have good income levels, they have a great credit rating and they have lots of equity in their home. As long as they do not have other loans that eat up their monthly income levels they should be approved for a home equity loan refinancing package with no problems.

Most banks would be happy to do business with them, however as always the deals they offer will vary depending on their business plans and availability of funds to lend.

The first question they asked was how refinancing works.

Basically the bank will want to obtain a real estate value assessment to confirm the value of the home, ensure that the current mortgage is dis-chargeable and review the finances of the applicant. The clients  may need to provide evidence of income to support the increased mortgage payments.

The fees could include the following, however many of them are negotiable, so don’t forget to ask the bank to waive these fees. The worst that can happen is that they say no!

Fees associated with Home Equity Loan Refinancing:

  • Mortgage Insurance: 2% (of the appraised value) (Optional)
  • Title Insurance (varies)
  • Title, Attorney, and County Recording Fees (varies)
  • Real Estate Appraisal $300–$500
  • Survey (may be required) $300–$500
  • Administrative Fees
  • Current mortgage discharge fees

This is a complete list as far as we know, however all may not apply depending on your situation. The bank  will forward the funds to your lawyer, he or she will discharge your current mortgage and provide the remainder to you after deducting the fees that have been agreed to. It is pretty simple once the bank approves the home equity loan refinancing deal.

Rates for Refinanced Mortgages

These are pretty much the same as any other mortgage and depend on the bank you are dealing with.  They may use a marketing term to describe them, but the actual mortgage is the same.  Rates should be very competitive for someone with an excellent credit rating.

Line of Credit home equity loan refinancing

Some customers who are planning renovations and who do not need all of the money at once, may feel that a line of credit home equity loan refinancing is a preferred way to go. Basically this type of mortgage is approved up to a specified limit and the customer can draw on this mortgage anytime he wants up to the limit approved. They can also repay part or all of the mortgage at any time as well.

Our reader is in an excellent position to negotiate his home equity loan refinancing mortgage application.

If you have questions for us, leave us a comment with as much information as you can and we will try to answer all of your questions. For more details about home equity loans, click here.

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One Response to “Home Equity Loan Refinancing”

  1. If you are lucky enough to have equity in your home, you can borrow against it, however I would rather pay off my mortgage than use this equity. I want to be mortgage free when I retire.

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