If you have a home equity loan with a higher rate than those currently being advertised, it might be time to consider refinancing. You can also use a new home equity loan to pay off a HELOC that’s coming due. It will enable you to extend the term of the loan and lock in a fixed monthly payment. When you refinance a home equity loan, it may not only net you a lower interest rate and better payment terms but also enable you to complete a new home improvement project or pay other expenses. Read our tips for refinancing.
Seven tips on how to refinance a home equity loan
- Determine if you are creditworthy by evaluating your current financial situation. Begin by checking your credit score. Is your credit score good enough for you to qualify for the new low home equity loan interest rate? A credit score in the high 600s or above is considered to be good while a score above 750 is considered to be excellent. Do you have a steady job with a reliable income stream? Have you been reliable in paying all of your bills? Remember that just because you have a loan now doesn’t mean you are guaranteed of getting a new one.
- Calculate all costs involved to be sure they don’t undermine the benefits of refinancing a home equity loan. This would include an application fee, appraisal fee, closing costs, or any other fees. There might also be prepayment penalties on your existing loan, so be sure to find out.
- Get an appraisal. This may or may not be necessary depending on the date of your last appraisal and the amount you are looking to borrow. An appraisal will give you an accurate estimate of your home’s worth.
- Calculate the equity you currently have available to borrow against. You will need to have sufficient equity to refinance a home equity loan. Loan-to-value is important.
- Determine how much equity you are looking to borrow. Are you just paying off an existing home equity loan or home equity line of credit or are you looking for some additional cash?
- Find a lender that you trust to help you refinance your home equity loan. Look for the best home equity loan deals. Choice One Community Credit Union is currently offering Home Equity Loan Rates as low as 2.94%APR* with no fees** Your lender can also help you with some of the tips above, such as the necessity of an appraisal or calculating your fees.
- Gather the information for your lender. Read on to learn about the documents you will need.
Be prepared with the necessary documents and financial information when you refinance a home equity loan
- Social security number
- W-2 statements and 1099s
- Copy of your most recent pay stub
- Proof any other income
- Current mortgage statement
- Current home equity loan or HELOC statement
- Any other loan statements
- Asset listing, including account balances
- Proof of homeowners insurance
- List of previous addresses
While there’s really no limit to the number of times you can refinance a home loan or home equity loan, you do need to have enough equity build in your home to justify it. Refinancing your home equity loan can help you save on interest and possibly even lower your monthly payments. You may also be eligible for a cash-out refinance to help you with the cost of home improvements, college tuition, and other expenses. If the current interest rates are lower than those of your existing loan and lowering the rate would help you to save money, a home equity loan refinance might be the solution for you.
Apply for a home equity loan refinance
Once you’ve gone through all of the steps above and you’re prepared, it’s time to apply for your home equity loan. At Choice One Community Credit Union, we allow you to apply easily right online or download an application to complete at your convenience. We’re the right choice for home equity loan refinance.
*APR=Annual Percentage Rate. Rate shown is for qualified borrowers and are subject to change without notice. Rates shown for the Home Equity Fixed, Auto, Personal Rate includes a .25% discount for auto deduct from a Choice One share or share draft account. Contact your credit union loan officer for complete details and current rates. Contact your tax advisor regarding the possible deductibility of interest. Finance charges will accrue during the auto loan 90 day no payment
**No Closing Cost Promotion applies to first lien only. Third-party fees will be reimbursed for the cost of originating your loan excluding any property tax or transfer fees. Fee Reimbursement–The lender may have paid some third party fees associated with this loan. Please refer to the Closing Disclosure provided prior to loan closing for an itemization of third party fees paid by the Borrower (if applicable), and those paid by the Lender on the Borrower’s behalf. The Borrower agrees to reimburse the Lender the actual amount of bona fide third party fees paid on the Borrower’s behalf, as permitted by applicable law if the loan is paid off within twenty-four (24) months after consummation.