Equity Loans

We provide equity loans on all types of property. Equity loans, sometimes referred to as a "cash out refinance", can be a good solution for anything from handling home improvement projects to using them to eliminate other personal debt, including car loans and credit card debt.

If you have any question about it, you may want to consult a CPA, but in most cases the interest on a home equity loan is tax deductible. Therefore, if you can take "non deductible" interest that you are paying on a debt and turn it into "tax deductible interest" it probably makes sense to do. The other thing to consider is that if you are paying off non-recurring debt, like credit card debt, and you can use it to STOP THE BLEEDING that the insane interest rates the credit card companies cause, then it also makes sense to do. By stopping the bleeding, lowering your outgoing monthly payments, and turning it into interest you can deduct, you'll spend a lot less money over the years. Another aspect to look at, is if you do refinance and use part of the difference you are saving in monthly payments to pre-pay your loan, you will pay off your house that much faster. The numbers can be amazing once you put a pencil to it, and we're happy to sit down with you and show you the savings. The difference in working with Baker Mortgage, is that if it does not make sense to do, and does not put you in a much better place financially, we are going to be the first ones to tell you. We want to help you, but what we won't do is help you over a cliff.

One important thing to keep in mind is that the rates on equity loans, or cash out refinances, are always a little higher than regular purchase or refinance rates. The good news is that with interest rates being down so long, the difference in rates between a straight refinance loan (of just your existing balance) and an equity loan has come down substantially. The market and the type of loan program you are looking for will help determine how much higher the rate will be; at one time the difference in rates was anywhere from one to two points higher, whereas these days the difference in equity loan rates is more likely to be half a point to three quarters of a point, depending of course on the market.

Since equity loans are a different sort of animal, there are different ways to approach it. Your individual situation will actually determine which way it makes sense for you to go. There are a number of important factors that will help determine the best direction with an equity loan. These include but are not limited to how much longer you plan to own the home, your personal cash flow position, and other debt that you are looking to eliminate with the home equity loan. All of these things need to be considered in the process of choosing the right home equity loan. There is no one fix that's the best deal for everybody. It really does depend on your individual situation, and only someone who has looked at your situation, and seen what you have and what you're trying to accomplish can offer the best advice on something like this.

Currently in Texas, with acceptable credit and good mortgage payment history, you can usually borrow up to 80% of what your home will currently appraise for, and up to 90% on an investment property, providing it is a residence. Also keep I mind that any one loan that exceeds 80% still requires and escrow account and private mortgage insurance.

On commercial property, the typical equity loan limits are in the neighborhood of 70% to 75% of the current property value, and may vary significantly due to the type of property, it's location, as well as the financial health of the business.

Last but not least, there is not such thing as a free lunch, and there is not such thing as a free loan. When you see something advertised as having "no closing costs", just remember it does not mean that you aren't paying anything just because you can't see it. On these "no costs" deals, you are usually paying it in the form of a higher interest rate. However, depending on your individual situation and what it's going to do for you, it still may make the most financial sense in the long run.

One final word of caution when it comes to financing property, especially equity loans. Always be extra cautious if dealing with an out of town lender, or anyone else who is putting pressure on you to sign up. Just remember, check out all your options, then make your decision.

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