If you’ve been paying for your mortgage for a long time now, you might want to consider tapping into the equity you have built on your property. Instead of refinancing your current mortgage and cashing out home’s value for no real good reason, having a second mortgage might be a better idea.
A home equity loan allows you to do it. Although most of its kind come in a form of a HELOC, a line of credit may bring more harm than good over time because its rate is adjustable and tied to prime. Cashing out the portion of your home’s value in lump sum, on the other hand, involves a fixed interest rate.
While every loan has its unique benefits and drawbacks, a home equity loan may be made for you if:
You are Moving Out in the Future
Unlike refinancing your existing mortgage, home equity loans usually only last for five to fifteen years. So if you don’t see yourself living in your neighborhood in the next decade, this type of financing is perfect.
You Want a Low Rate & a Short Term
A home equity loan allows you to snag the lowest fixed mortgage rates in Salt Lake City, as AmericanLoans.com emphasizes, without having to commit for a very long time. While a short amortization period is disadvantageous to many, it’s not if you can afford it. In addition to the low, fixed rates, paying it off early can save you a lot on interest over the life of your second mortgage.
You Want to Pay Off Your First Mortgage
If you can get a lower rate than what you’re currently paying, and if you have just a few more years to finish it, a home equity loan is an excellent source of money to finish your first mortgage. Even if you don’t see the gain in your new monthly repayments, doing the math could reveal the thousands you might be saving.
Home equity loans are not for everyone, but if you can relate exactly to the situation above, then it’s common sense to pursue it. Rather than shopping around alone, it pays to work with a broker to also access relatively unheard of deals.