How Do I Refinance a Mortgage & Get a House Equity Loan?
Home equity loans and cash-out refinancing are different choices. As BankRate notes, you take out a home equity loan in addition to a mortgage. Generally, homeowners don’t concurrently refinance their current mortgage and take out a home equity loan. Rather, to tap the equity in your home, you may be qualified for cash-out refinancing. In this scenario, you refinance your mortgage for an amount greater than its remaining balance and maintain the excess cash for other purposes.
Call your lender. Find its contact info in your monthly mortgage statement.
Inform your lender you’re interested in a cash-out refinance. While standards varies by lender, normally you need excellent credit and equity within your home, which means that you’ve paid off a substantial portion of your loan. If your home value has diminished significantly, you probably won’t be eligible for cash-out refinancing. The worth of your home acts as the collateral for the excess cash your lender is providing you, so you have to be in positive territory with respect to your loan and home value.
Shop around for the best rates and terms. Your original lender may cut you an attractive deal to maintain your enterprise, that the Federal Reserve Board says. Competing lenders have the choice of meeting or beating your bank’s best bargain to wrestle your business away.
Provide documents confirming your expenses and income. Your mortgage agent’s underwriter will inform you exactly what you require, but generally this will include tax returns, paycheck stubs and statements detailing monthly payments and payments on credit card accounts, and automobile and student loans.
Use the cash you get in excess of the principal balance on your refinanced mortgage for other purposes, like financing your child’s education, home improvements or to pay down additional high-income debt.