Rates are on the move but you have options

With rates on the move again, CNBC reports that "mortgage applications were 83% lower" from the same time a year ago. What does this mean if you’re a homeowner with a low mortgage rate who still wants to access cash from your home’s equity? Here are your options…

Debt Consolidation, Home Improvement, Tuition and More.

There are any number of reasons you may want to access cash from your home’s equity. And the fact is, it’s equity you deserve to tap if you need it to fund a major expense, pay off high-rate debt or anything else.

But when rates begin to rise as they have been this year, most homeowners are afraid they will have to refinance their low first mortgage rate to get cash from their home’s equity. And that’s just not the case, thanks to fixed-rate home equity loans.

Access cash from your home—without touching your low first mortgage rate

Home equity loans allow homeowners to access the equity in their property through creating a second lien, or second mortgage, on their property. This new mortgage may have different terms than the property’s first mortgage and creates a new payment schedule.
 
So home equity loans differ from first mortgage refinance loans by adding a second mortgage onto your property rather than changing the terms of your existing mortgage.

Fixed rates + flexible terms

Some important aspects to home equity loans are their interest rates and closing costs. Home equity interest rates are usually a fixed rate and dependent upon the prime rate, customer’s credit score, credit limits, lender, and loan-to-value (LTV) ratios.

Closing costs are often similar to your original mortgage, around 2-5% of the loan amount be taken out. The combination of fixed interest rates and similar closing costs allow for predictable repayment costs.

Home equity lines of credit, or HELOCs, serve as a revolving line of credit similar to a credit card, but with some very big differences. A HELOC is typically taken out in addition to your existing first mortgage, and lets you borrow against your available home equity with your property as collateral.

As a result, a HELOC is considered a second mortgage and has its own term and repayment schedule, completely separate from your first mortgage. On CNBC.com, Thomas Blackburn (CFP with Mason & Associates) said: “You have a pool of money you can draw on, and it doesn’t cost anything unless you use it…It’s almost like insurance.”

Also on CNBC.com, Dennis Nolte of Seacoast Bank said, “You can’t eat your equity, but if you can monetize some of it to reduce debt and make life easier from a cash flow perspective, that makes a ton of sense in most situations.”

Interested in seeing how much cash you can access from your home’s available equity? Drop us a line and let’s see what options are available for you..