subject: Important Differences of Refinance Mortgage Loan, Home Equity Loan and Loan Modification [print this page] Important Differences of Refinance Mortgage Loan, Home Equity Loan and Loan Modification
Refinance home mortgage is plainly substituting the existing mortgage loan with a better one that usually provides better interest rate and consequently low monthly payments. When the rates have gone down fairly to justify the refinancing costs, the switch would be appropriate to save cash on usually the largest household liability. Comsumers with home equity could use the money for number of different reasons such as home upgrade, paying other high interest loans, credit cards, bills and even for business purposes. Refinancing a mortgage could bring down debt costs considerably and let the money saved be used for other outgoings. Some people may wish to pay off their mortgage earlier by using the interest payment savings to pay off the outstanding capital.
Some people prefer not to refinance the full outstanding mortgage loan, instead take cash out from home equity. They can achieve this by getting a home equity loan also known as second mortgage. As the name imply, this is a loan in addition to the existing home mortgage which is left without change. Should you need only small amount of cash to cover your needs, this would be a better option than refinancing. Furthermore, if the present mortgage rates are higher than the rate you are paying, it would not make sense to touch the home loan you have.
Loan modification is completed through your existing lender. Normally, people need to be behind with their loan payments before a loan modification proposal is accepted. Loan modification is typically used to assist bringing people up to date with their home mortgage. Your lender may be convinced to lower the rate to aid you cope better with the payments. You need to make a genuine case to realize a fruitful loan modification; it is not just a case of being entitled for a better deal.
Loan modification is the same as re-negotiating a better deal with your lender. To do that you need to be in a position to move your home loan to another lender. In other words, a good credit rating, secure income and some home equity would help highly. In that case, your existing mortgage provider would not want you to refinance but remain with them. It is very much advisable to search possible refinancing rate offers before you contact your lender. You never know you might come across an irresistible deal somewhere else while looking for.
