A home equity loan is usually a second mortgage against your home, meaning it is a loan that you take out using your home as collateral without paying off your first mortgage. Determining whether it’s best to refinance or to obtain a home equity loan depends on many factors, beginning with your personal financial situation.
Generally, a home equity loan should be considered:
- After reviewing the interest rate on your existing mortgage
- After reviewing the remaining term on your existing mortgage
- The term is shorter the other loans you are considering
- If the interest rate and points are higher on a new first mortgage
- If there is a requirement of mortgage insurance for a new first mortgage.
A home equity loan can finance home improvements, credit card or debt consolidation, vacations, college tuition, medical expenses, vehicle or recreational vehicle purchase or second home – even give you extra cash for emergencies.