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 care loans and credit card debt, or even to provide a cushion for a savings account. With interest rates being as low as they are now, it’s definitely something to consider.
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 is 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 charge, then it 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 your house off that much faster. 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’re going to tell you. We want to help you, but what we won’t do is help you over a cliff.
The rates on home equity loans are always going to be slightly higher than rates on a purchase or a straight refinance loan where there has been no equity taken out. With interest rates being down for so long, the difference between “regular’ rates and equity rates is not very much, but something you need to keep in mind when you are looking at published or advertised rates. IF YOU HAVE EVER TAKEN EQUITY OUT OF YOUR HOME IN TEXAS, YOUR LOAN IS AN EQUITY LOAN AND ALWAYS WILL BE. Keep that in mind when comparing rates and pricing, because if you have an equity loan, it’s a different kind of animal than a purchase or straight refinance loan.
The rates on home equity loans will be determined by the loan to value ratio and your middle credit scores. When looking at the rates and payments available on the equity loan, compare it to the rates and the payments you’re putting out each month on accounts you could pay off with the much lower interest rate equity loan. That’s a great way to see what your potential savings could be.
Currently in Texas, with acceptable credit and good primary mortgage payment history you can usually borrow up to 80% of what your home will appraise for, and between 70% & 75% on the current value of second homes or investment property.
Last but not least, there is no such thing as a free lunch, and no 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 necessarily see it. On these “no cost” loans, you are usually paying it in the form of a higher interest rate, so be careful, look at the whole picture and explore your options.