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Florida Home Equity Loan Guide

Florida home equity loan guide written by Sonny Solomon at The Keyes Company

February 8, 2014 //  by Sonny Solomon

There are many different home equity loan options. Some may be a better fit than others based on your situation, mortgage rates, and what you need the loan for. The Florida home equity loan guide provided in this blog will help you understand your options.

Different Types of Home Equity Loans

Cash-out Refinance

A cash-out refinance pays off your old loan and replaces it with a new one. The new mortgage includes the amount of the old loan, the extra equity you are borrowing and applicable settlement costs. Because you are paying off the old mortgage, rather than getting a new loan as a second mortgage, the interest rates may be better than a second mortgage. This is basically a normal refinance except that you are extracting equity in the home. The funds are given to you all at once. When reviewing a cash-out refinance, compare the rate of your current mortgage with the new one. If the new finance rate is less, then it may be a good option. Otherwise, you may want to ask about other options and retain your first mortgage rate.

Home Equity Loan

A home equity loan is a second mortgage in addition to your first mortgage. With this loan, you borrow a lump sum of money to be paid back over a specific amount of time, either at a fixed rate or a variable one. Second mortgage rates tend to be higher than first mortgage rates. Settlement costs also still apply.

Home Equity Line of Credit (HELOC)

A home equity line of credit normally has an adjustable interest rate that changes when the prime rate moves. HELOCs are open-ended, so they are similar to credit cards. The lender identifies your maximum line of credit. You can borrow money up to that limit as needed. Your payment reflects the actual balance. As your balance drops, the remaining credit may still be available for use. Credit limits may be altered by the lender should dramatic changes take place in the real estate market.

Ask about annual fees, cancellation fees, and mandatory minimums or withdrawal requirements. Like credit cards, HELOCs can be changed by the lenders at any point. This loan type may be great if you are uncertain about needing the full amount of the loan. However, be aware that the maximum allowed can be reduced, limiting the available funds.

Florida Home Equity Loan Guide

All home equity loans are based on the market value of your home and the balance of current mortgages. You can get a sense of whether you have any equity in your property by contacting a local real estate professional for a market analysis. Lenders will order appraisals to identify a more definitive figure prior to approving the loan. Be careful not to pull out more equity than you realistically need. Also make sure that the new mortgage payments fit your budget. All home equity loans use your property as a lien, leaving you susceptible to foreclosure if you fail to make payments. This Florida home equity loan guide is for informational purposes only. Consult with a local mortgage consultant for relevant interest rates, closing costs, and other options.

Category: Mortgage InfoTag: Florida, home equity loans, mortgages

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