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If interest rates have significantly come down since you got your home equity loan, refinancing your home equity loan can save you money through lower monthly payments. To save money by refinancing, your savings in lower monthly payments will need to recover the refinancing closing costs and fees. Other advantages of refinancing a home equity loan include switching from a variable interest rate to a fixed rate, freeing yourself of a balloon payment and changing the term or length of a home equity loan.
When you consider refinancing a home equity loan, you should also consider if it makes sense to refinance your first mortgage at that time as well. If the current interest rate is significantly lower than your first mortgage rate, it may make sense to also refinance your first mortgage at the same time.
If you decide to refinance a home equity loan for a longer term than your first home equity loan, have your lender show you exactly how this will effect the interest paid.
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