Home Equity Loans and Lines in NH
Home equity is the most significant source of wealth for many homeowners.
Once you purchase a home and begin making payments, you immediately begin building equity. Of the 69% of U.S. householders who own their own homes, 24.7% have accumulated 100% equity.*
Your home may be the most valuable asset you ever own. Usually it is an untapped resource that can be used to your benefit. Nontraditional refinancing products allow homeowners to lower their monthly mortgage payment and borrow money to strengthen their financial position.
Cash-out Refinancing (or “equity release”) allows homeowners to refinance their existing mortgage and receive a portion of their equity back to use for things such as remodeling, consolidating higher-interest debts (such as credit cards or loans), or investing money in things that may offer a higher return.
Cash-out programs allow borrowers to receive up to 80% of the loan-to-value ratio for their home. In other words, the lender would pay off the borrower’s existing loan and provide cash of up to 80% of the home’s value. (For example, a homeowner who refinances a home valued at $300,000 – and whose balance on his or her existing loan is $200,000 – would be eligible for up to $40,000 in cash.) Homeowners can then use that money to help pay for a college education, investments, or purchase a vacation home. All related closing costs, financing costs, and prepaid items can be rolled into the new loan amount, further maximizing your cash flow potential.
A Home Equity Loan (HEL) or Home Equity Line of Credit (HELOC) might be a more sensible choice if the interest rate offered for your refinanced mortgage is significantly higher than your current rate. While cash-out refinancing is a replacement of your first mortgage, home equities are separate loans on top of your existing first mortgage.
A Home Equity Loan is customarily a fixed-rate loan with fixed monthly payments. These loans are structured very similarly to your first mortgage. You make a one-time choice on the amount you want to borrow and how long you want to take to pay it back – typically no more than 15 years.
With a Home Equity Line, you draw and repay funds similar to other revolving lines of credit such as credit cards. You borrow as much or as little as you would like going forward, as long as you don’t exceed the maximum loan amount and you make at least the minimum monthly payments based on the balance owed that month. You’ll typically get a 5-to-10-year draw period and then another 5 to 10 years to pay it off. Home equity lines are usually based on the prime lending rate, which is an adjustable rate.
Which is best for you?
Home equity loans and lines are great solutions for borrowing more than you’d want to put on a credit card, because the interest rate is usually lower and the interest may be tax deductible.
The home equity line of credit is ideal for short-term borrowing when you have a plan to get it paid off within a few years, before interest rates go up. If it is going to take 5 or 10 years to pay off, you will be better off locking in a fixed rate with a home equity loan so you can budget a set payment and not worry about what happens to interest rates.
Please contact Charley at (603) 471-9300 or email me to determine if a NH home equity line or loan would be best for your plans.
We have originated more than $500 million of real estate loans to thousands of New Hampshire property owners and are happy to share our experience and expertise with you.
*Source: 2005 Census Bureau and HUD figures