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Mortgage Refinancing vs Home Equity Loans

If you’re considering cash-out mortgage refinancing to take advantage of today’s rates, you might consider a home equity loan if your goal is to avoid paying fees. There are advantages and disadvantages to consider with any new home loan beyond paying closing costs. Here’s an article from HSH.com with several pros and cons of a home equity loan:

Homeowners with equity in their property can take out a home equity loan that uses their home as collateral. A home equity loan, also sometimes called a second mortgage, is a lump-sum loan, usually with a fixed interest rate and a specific loan term. Homeowners can also consider a home equity line of credit, which is a similar loan but has a variable interest rate and works akin to a credit card with a set spending limit.

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While it’s true your fees on a home equity loan will be less than closing costs your interest rate will be higher than mortgage refinancing plus there’s the temptation to over-borrow. If you’re mortgage refinancing to lower your monthly payment it’s important to minimize fees from lenders like Amerisave, including the loan origination fee.

If your goal is to lower your monthly payment by mortgage refinancing and you don’t recoup your out-of-pocket expenses from the lower payment amount you’ll be losing money no matter how low your refinance rates. You can minimize your risk and out-pocket expenses by avoiding lender junk fees like rate lock fees, application fees, and loan processing fees.

You can learn more about getting today’s best refinance mortgage rates without paying unnecessary lender fees by checking out my free Underground Mortgage Refinancing Videos.

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