Mortgage Refinancing: Mortgage Make-Over

2007-03-08 10:33:40

( Financial )



TRADING NEW FOR OLD

Mortgage refinancing can refer to several things: taking a new mortgage from your existing loan provider to supplant your old mortgage. The amount of the new loan is big enough to close your old one and it leaves you with enough cash that you can use arbitrarily.

The other type of mortgage refinancing works pretty much the same as the first type, except this one is provider by another lender altogether. Under this type of mortgage refinancing, you totally replace both your old mortgage and old lender with new ones.

People usually avail of these first two types of loans to restructure or redesign their loan terms either with lower payments, lower interest rates, or longer payment period. Basically mortgage refinancing allows for any change that renders the new mortgage more manageable on your part.

EQUITY REFINANCING

Taking a home equity loan or an equity credit mortgage is also a form of mortgage refinancing. However for these types, your loan is limited by the equity that you have on your property - you cannot borrow more than that. Equity refers to the part of your home that has already been paid for and is free of any debts.

When you take an equity loan you just borrow against the debt-free portion of your property. Usually the loan is taken for a different purpose like paying another debt, but the equity loan amount is not big enough to close your outstanding mortgage.

When you take an equity line of credit mortgage, you avail of a revolving credit line that you can draw from as needed. You may opt to stagger its use, or take out the entire loan-able amount as the case may be. As you pay off the principal, the line of credit mortgage is renewed and then you can draw from the line of credit again and again.


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