Changing the Face of your Current Mortgage

Home equity loans and refinances are two different types of mortgage loans for different situations that are used by millions of Americans to improve their financial environment in one form or another. With the home equity loan, you can use the value in your home to make changes to the house, pay off other bills or handle emergency situations. Home refinances, on the other hand, are more simply a way to renegotiate the terms of your original home loan so that you receive better rates or a lower payment amount if the market and your credit score allow. We'll discuss a bit more about each mortgage type here.

Refinancing your Home

A home refinance is a way to do one of several things. It can put more money in your pocket by changing the terms of your loan to allow for more time to pay, it can lower your interest rates, or, if your financial situation has improved significantly enough, it can motivate you to pay off your mortgage loan much sooner than is required under your current terms.

The most common way that home refinances are used today is as an option out of an adjustable rate mortgage (ARM) that was signed on to when the mortgage loan was first taken out to purchase the home. ARM loans typically come with extremely low mortgage rates initially, but then, in a few years when the time comes to adjust the interest rate (and therefore the mortgage payment), people often find themselves in trouble and unable to handle their new mortgage payment amounts. Enter the refinance loan either with the same lender or with a new one. A refinance is a way to change the terms of your loan by essentially taking out a new one. The end date on your loan will change as well as possibly the interest rate, and the monthly payment to reflect that new interest rate.

If you are having difficulty paying an adjustable rate mortgage in your current home, you might want to consider an Iowa Mortgage Loans refinance option through our network of lenders. If your credit and income are sufficient to the task, you could find yourself in a new mortgage in less than a month with lower payments that are easier for you to manage.

The Home Equity Loan

Home equity loans are also commonly referred to as second mortgages, because essentially that is what a home equity loan will give you. Equity in a home is the amount of money that a home is worth minus what you owe on the loan. If that amount is positive, you have equity that you may be able to use to secure a loan. For example, if you purchase a home for $200,000 and it increases in value in five years to being worth $300,000, and you've paid off $30,000 toward your home, your home will have about $130,000 in equity. Another bank or lender may be willing to offer you a loan against that equity amount which you can then use for whatever reason you want such as home improvements, sending your kid to college or even consolidating other debts.

Not all banks offer home equity loans or offer them on terms that will be suitable for you, so be sure to check with a professional banker if you are interested in using the equity in your home. You should also note that home equity loans do not provide you 100% of the value of the equity in your home.

Once you know what you are considering with your mortgage loan, you should see what the different key influences or your home loan are.