Home equity refinancing

Home equity refinancing can really help you to reduce your monthly bills.

So what exactly is a home equity loan, and is it the same thing as a H.E.L.O.C. or a home equity line of credit?

By putting up your house or condo as a form of collateral, it can be possible to secure a loan against whatever amount of equity you have built up in your home.

This particular type of financing arrangement is usually called a home equity loan. Now it shouldn't be confused with the similarly named home equity line of credit or HELOC , which is a different animal altogether.

A HELOC, you will find, is a very specific type of financing arrangement. It is a credit line that can be offered to anyone that owns a house or condo. The owner can then make withdrawals off of that line of credit as if it were a credit or debit card.

A home equity loan, on the other hand, is a single lump-sum loan that the home owner pays back on a schedule over time. A Home equity loan often has a better interest rate than a HELOC, and a fixed-rate loan is often more advantageous than a variable rate line equivalent.

A home equity loan can be utilized for almost anything. They also frequently have fixed interest rates, and they are also usually tax deductible (though it's a very good idea to check with your accountant to make sure this is true in your case).

You should definitely take the time to consider all available options when you are thinking of borrowing money against the equity in your home. Depending on your individual circumstances, you might be better off going with a HELOC, a second mortgage, or refinancing your mortgage altogether.

You need to take into account that there are some definite risks to taking out home equity refinancing. Essentially, you can be, in effect, withdrawing all or part of the equity in your home in one lump sum.

While this offers advantages over credit cards or other short term and unsecured loans, like lower interest rates and possibly tax deductions, you are ultimately putting your home at risk in order to receive these benefits.

Only a qualified financial advisor can truly tell you what type of loan, if any, makes the most sense for your situation. But quite possibly, home equity refinancing can save you a bunch of money now and over the long run. 

Find out more about HELOCs here.  And check here for more on Home Equity Line of Credit information.