Questions we often get from our customers about home equity
Q. Why refinance?
A. If you currently have an Adjustable Rate Mortgage (ARM) and your payments are expected to increase due to an expected mortgage rate increase or you would like to benefit from the convenience of a guaranteed fixed payment amount for your loan term, refinancing may be a good option for you.
If you want to turn the equity you have built in your home into cash for additional expenses like home improvement, educational expenses or other financial needs, refinancing would be a great option for you.
A. The equity in your home is determined by subtracting your outstanding mortgages or liens from the market value of your property. Try our calculator to estimate the current equity in your home
Q. What is a line of credit?
A. A home equity line of credit is an open line that is secured by your primary or secondary residence. It allows you to borrow funds at any time, up to your available credit limit.
Q. What is refinancing?
A. In simple terms, refinancing replaces your current mortgage loan with a new one. Homeowners typically refinance to reduce monthly payments (because the current rates are lower than what they are paying), to switch to a different type of mortgage, or to cash out equity in their home.
Q. At what point might refinancing save me money?
A. If mortgage rates are 5/8-percent lower than what you're currently paying, refinancing may offer you savings against what you are currently paying.
Q. Do I need a home equity loan or a home equity line of credit?
A. Both products use your home as collateral. The main differences between the products are: The line of credit is accessible for a long–term draw period, usually by check. Once you pay down your balance, you then have more money available to spend again if necessary. A home equity loan disburses all funds at once when the loan term starts and you cannot access any further funds without refinancing. A line of credit has a variable interest rate. A home equity loan has a fixed rate. A home equity loan has payments that don't change. A home equity line of credit has a payment that can change every month, either because the balance changes (increases if you spend more; decreases if you pay down what you owe) or because the interest rate changes because of the Prime rate changing.
Q. Do I want an interest-only loan?
A. Interest-only loans allow you flexibility on monthly payments when your cash flow does not permit a fully amortizing loan payment. The minimum loan payment covers the interest portion of the loan only, so your principal only decreases if you pay above and beyond the interest. You have the flexibility to decide how much principal you pay each month, so you can pay little or none if times are tight, or a lot if you have extra that month.
Q. Why should I refinance?
A. There are numerous reasons customers refinance the loans they already have. Some of these are to lower the monthly payment or interest rate, to switch from an adjustable rate to a fixed rate or vice-versa, to refinance for a higher amount in order to pay off other debts or get cash, or to change the remaining term of the loan.Whatever your needs, we can help you decide what makes the most sense for you.
Q. Do I need a home appraisal?
A. Sometimes we do not need to conduct an appraisal; other times we have to conduct a full appraisal, and there are levels in between. Only after reviewing your application and collateral information will it be determined whether one is needed for your situation.
Q. What is the difference between interest rate and APR?
A. The interest rate is the cost to borrow the money disbursed in the loan. The APR is the total cost of the loan over its life, including costs, points and fees.