How to save money using a home equity loan for a mortgage refinance
Using a first lien home equity loan in lieu of a first lien mortgage loan might mean significant savings to those looking to take advantage of recent rate reductions for mortgage refinance.
The savings is actually in the form of much lower fees and closing costs than a traditional mortgage refinance.
You may not have previously considered a home equity loan as an option for mortgage refinancing.
In certain instances, home equity loans can be a great solution.
You would need to have enough equity built in your home to qualify for an adequate size home equity loan.
This will give you that first-lien that enables you to get a better rate, such as Spirit Financial Credit Union’s Smart Equity first-lien home equity loan rate.
Just like a mortgage refi, you will get a lump-sum payout with a home equity loan, enabling you to pay off your existing mortgage.
You can also opt for a cash-out refi with your home equity loan for some extra cash if you need it.
Again, it depends on the total amount of equity built in your home and the balance owed on your mortgage.
Mortgage refi vs. home equity loan for refi
The main difference between a mortgage refinance and a home equity loan is that a mortgage refinance replaces your existing mortgage loan, while a home equity loan is a loan typically taken in addition to your mortgage loan.
It’s a type of a second mortgage.
Because of the difference, you might not have realized that it’s also possible to use a home equity loan to refinance and pay off your existing mortgage.
Similar to a mortgage loan, a home equity loan is an installment loan repaid over a fixed term.
You will have one set monthly payment for the life of your loan.
A plus with using a home equity loan for refinancing is saving on closing costs and fees.
If you have enough equity built in your home to qualify for a first lien home equity loan, you might benefit from the lower fees using this type of loan as opposed to a traditional mortgage loan.
To learn more about Spirit Financial Credit Union’s Smart Equity first lien home equity loans for mortgage refinancing, call 267-580-0230 to schedule an appointment or visit online at https://spiritfinancialcu.org/smartequity.