What Role Does a Home Refinance or Home Equity Loan Play in My Financial Picture?

Should I refinance?  Should I utilize equity in my home to help pay off bills, make home improvements, or build up an emergency fund?  What will it cost me?  Who can I trust?  What will I qualify for? 

These are questions every homeowner faces when thinking about their home and the role it plays with their finances.

Unfortunately, some people view this as too overwhelming and simply do not take the time to talk to a professional about how their home can benefit their short and long term financial goals.  The good news is there are professionally licensed Loan Advisors that can help walk borrowers through this process.  An expert Loan Advisor can create a stress free experience of closing a loan. However, borrowers must be willing to take the first step and have a conversation with a lender who has the experience and knowledge to navigate them through the mortgage loan process.

Some reasons to obtain a home refinance or home equity loan:

• Save money
• Shorten the term
• Consolidate debt
• Get cash out for home improvements or other cash needs

It is important to control and manage finances properly. Refinancing is a strategy borrowers often use to get into a better financial situation and meet economic goals. Some borrowers choose to refinance to get a lower rate and may be able to reduce monthly payments. Others opt to shorten the term of their loan which may allow them pay off mortgage debt more quickly. Typically an effective refinance can create positive, life-changing alternatives to one’s current and long-term financial position.

Many invest in a home equity loan to fund home improvements. In these cases, home owners can borrow money against their home’s value and invest it back. Improvements tend to have a positive effect on a home’s value. When the home’s value increases, more equity is created. According to the US Census Bureau’s Housing Survey about 50% of home equity loans are used to make home improvements.  

A home equity loan may be helpful for borrowers who want to consolidate their debt. By consolidating, borrowers may be able to manage their finances better because they will be responsible for one monthly payment, opposed to multiple payments to various creditors. Additionally, interest rates tend to be lower for home equity loans compared to credit cards, therefore the monthly payment could be lower.

Your home provides a great vehicle for financial change both short and long term.  Don’t be afraid of the process and don’t be afraid to look at your finances to uncover what needs to change. Do your research on who you can trust to help you with a home refinance or home equity loan. Chances are you will probably be surprised with how much your life and financial future can change.

Written By: Rob Williams NMLS# 345098, Assistant Vice President of Sales, Royal United Mortgage LLC
Date Published: 12/08/2016