Home equity borrowing has many benefits, but one major drawback. If you default, or fall behind on repayment, you could lose your home through foreclosure. In a foreclosure, the lender takes over the property and sells it at an auction. You can lose your home to foreclosure even if you’ve made all the payments on your first or primary mortgage.

But if you are using the money to make home improvements, pay tuition or consolidate high-interest debt, and include loan repayment as a regular item in your budget, home equity borrowing can be a great choice. But it is important to keep in mind that if you find yourself in the position of not being able to repay, you are exposing yourself to losing everything you’ve invested in your home…and this includes your home.

2) What is my break-even point?

Any time you get a new loan, there are a number of costs associated with the process: the appraiser, Title Company and closing agent all have fees associated with their services. Your Good Faith Estimate should outline these costs. Compare this amount to what you are currently paying to figure out when you will break-even.

An Allpointe Mortgage Advisor can help you to determine your break-even point. Call us now at 866-255-3535. Or you can use our break-even calculator.

3) Should I refinance vs. taking out a Home-equity loan or HELOC?

There are a several ways to access the equity in your home to consolidate debt:

• A Cash-Out Refinance
• A Home Equity Loan
• A Home Equity Line of Credit

A Cash-Out Refinance also allows you to access the equity that you have built up in your house. For instance, if you need $10,000, you can refinance your mortgage so that you owe $110,000 and the lender then gives you a lump-sum of $10,000 in cash at closing.

How fast do you need the money?
Home equity loans close considerably faster than a refinance - in as little as five days.

Are you sensitive to the costs and fees with new loans?
Home equity loans typically require minimal fees. Refinancing, on the other hand, may carry higher loan fees and possibly points.

What is the current rate on your mortgage?
If you already have a great rate on your mortgage, it may make more sense to get a home equity loan - even at a higher rate.

Do you want a shorter term on your loan?
You are generally limited to 15 and 30-year terms when you refinance. With a home equity loan, you can reduce the overall costs on your loan by selecting a time frame that works for you.

Call an Allpointe Mortage Advisor today for assistance in deciding on a line of credit. Contact us at 866-255-3535.