Type Of Finances - Home Equity, Refinance, Debt Consolidation & Mortgage Loans


Today there are lot of options available for purchasing a house. One does not need to wait for accumulating an obscene amount of money to buy their dream house. With lot of options floating in the market, customers are often confused while selecting the best pick suitable as per their need. We are presenting some of financing options in below discussion.

Refinancing

What is refinancing? As the name suggest it involves the financing of your existing borrowed finances. If this is what it means, then evidently there does not appear any advantage in going for it. However this is the catch, refinancing means, covering your current loan amount with another loan amount which is on lower rate of interest than the existing one. Most of us in the run to buy our desired house end up paying an exorbitant rate of interest. In refinancing a lower interest rate loan is granted to borrower to cover the higher interest rate loan that is already been secured with the piece of property.

However there are lot of factors which should be kept in mind while deciding on this i.e. whether we are going to save on interest rates or not, excluding the amount of refinancing fee. Though it should not be forgotten that interest rates are not fixed and they fluctuate as per the decision of Federal Reserve Board.

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Home Equity

Repaying a mortgage loan often leaves us with little cash in our checking account for any other big expense. It could be child's education, a marriage or even renovating your house. However if you own a house, you surely can cover these uncalled of hefty expenses by taking a home equity loan. This is a second loan (apart from the primary mortgage loan which is already running) which we take on our house. This amount is payable in stipulated period of time and has fixed rate of interest. The flexibility of home equity loan is that, though they are issued over the house, still the amount can be used for any purpose. However they have higher rate of interest than the original mortgage loan, and are granted for a smaller time period.

Debt Consolidation

Another option for paying off your outstanding dents is Debt consolidation loans. Debt consolidation can be explained as borrowing of a high interest rate loan to pay of a multitude of existing debts or loans. Customer is granted a loan amount on much higher rate of interest in order to pay his existing credit card debts, or other loans. Once granted, it zeroes down all your other debts by making this loan as single existing outstanding. However attractive his may look but it often results in default payment as the rate of interest is quite high, besides accumulating debt is an habit rather than circumstantial. If you have a habit of accumulating outstanding, chances are that even after Debt consolidation loan you still would be accumulating credits.

Mortgage Loans

The best option for buying your house is mortgage loans. This is most common and safest choice for everyone. It is not an easy task to pay the whole amount at one go while buying a house. Normally we don't have sufficient fund available, in that case mortgage loans comes to our rescue. Financial institutions issue the loan amount for buying the house, on a specific interest rate for a decisive time period. Customers are supposed to pay off the loan in that time period through monthly instalment. This way the money is divided over a period of time, and gives us easy opportunity to own the house and make comfortable payments. However the house is kept as mortgage with the lender. Once the repayment is done, home documents are transferred to the borrower. In case of default the lender would have the right to discard the house as per his wishes.