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Exploring The Home Equity Refinance Solution

Author : Ask Bill

If you are scouting around for a home refinance package, you should also consider opting for the home equity refinance loan option. The home equity refinance loan solution can be particularly useful for you if you possess bad credit, as it allows you to borrow against the equity in your current home and if you need to raise cash. Deduct the amount that you still owe your creditors from the market value of your home, and you would have a figure that indicates the amount of equity that you have in your home. People that posses poor credit scores may generally struggle to obtain usual home refinance packages from lenders out there. Thus the home equity loan option should be one that benefits those with low credit scores as the home is used as the collateral.

To be able to take advantage of this loan, you should generally approach sub-prime lenders, as they specialize in dealing with home equity loans for those with poor credit scores. The higher the amount of equity you have in your home, the better your chances of obtaining a decent home equity loan. These home equity loans usually come in the form of a lump sum, one-time payment, and are secured against the equity of your home. Thus one should not mistake this option with the home equity line of credit solution, as the second option provides you with a line of credit that you can withdraw or borrow from whenever you need to.

The only drawback of this mortgage refinance solution is the fact that you are allowing your home to be utilized as the collateral for the home loan. There should not be any complications if you service this loan well and make all the payments on time. But if you fail to make the monthly loan payments in accordance to what was agreed, your lender has the rights to confiscate your home to be able to recover the cash that was lent to you. That is probably the only disadvantage of this highly useful home equity refinance option.

If you would rather opt for other solutions in your effort to refinance your mortgage, why not explore the options that are offered by the central government? To help stabilize the real estate sector, the government has introduced several programs under the Making Home Affordable (MHA) program to help citizens of the country cope better with homeownership. Mortgage modification is now possible through the government with the Home Affordable Modification Program (HAMP) that generally allows struggling homeowners successfully modify their mortgage loans to suit their financial needs better. With this program, current homeowners have the option of probably extending their loan durations to obtain lower monthly repayment amounts, or maybe even obtain lower interest rates with modified loan deals.

Another program under the MHA initiative is the Home Affordable Refinance Program (HARP), which should allow homeowners to successfully refinance their existing homes and obtain newer loan packages with lower interest rates. This program would help homeowners that are struggling to obtain home equity refinance loans or other refinancing packages due to decreasing values of their homes. As long as your mortgageā€™s initial value does not exceed 125% of the current market value of your home, you may easily be able to qualify for this program and take advantage of it.

Regardless of which refinance option that you opt to undertake, rest assured that you have plenty of options out there in regards to mortgage refinancing. Thus it may be a good idea that you take your time and evaluate the options that best suit your needs before you agree with a lender on your mortgage refinance package. It is also recommended that you approach a few lenders and obtain home refinance package quotes from each one of them to ensure that you are choosing the best possible solution out there. All the best!

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Tags:   Home equity refinance, home equity loan, home loan

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Submitted : 2010-10-13    Word Count : 658    Times Viewed: 286