We’ve reached the final quarter of 2016, and that, for many of us, means thinking towards our goals for next year. Rather than waiting until New Year’s Eve and that list of New Year’s resolutions, right now is the best time of year to start thinking about your 2017 financial planning. Getting a plan in place now means the New Year can actually see a fresh start or a beginning to those goals.
Maybe your goal is to consolidate and get rid of your debt or to complete a much needed renovation. Either one of these, or many other, big ticket items, may have you looking towards your home for financing – and for good reason.
Your home is by far one of the cheapest ways to raise a lot of money if you need to finance something that is costly. There are different ways that you can go about refinancing your home. When you have equity though, you have borrowing power.
Refinancing your first mortgage or taking out a second mortgage are two very common options. The benefits here are low interest and low payments. There are some negatives though. Here we are talking about the closing costs required and the overall process which can include legal fees, lender fees, broker fees and appraisal fees. The process can also take 2 weeks or longer. Long amortizations mean that while the rate and payment may be low, the long term cost of borrowing can be very high (meaning you actually spend more in the long run).
A secured line of credit is another popular option. While these carry some of the same costs as refinancing your first mortgage or taking out a second, sometimes the closing process is faster and in some cases an appraisal may not be required. The main negative with a line of credit, even at a low rate, is the fact that once you pay off a portion, that portion is made available to you once more. Therefore, it is like taking out a credit card with a huge credit limit. This makes a line of credit that much harder to pay off so over time many people refinance them into their first mortgages.
One final option, and perhaps the best out of all of these, is one that takes the best of all worlds. If you have significant equity in your home, some finance companies, like Prudent, will extend mortgage type financing without registering a second mortgage on your home. This means that no appraisal is required and there are no legal fees. Also, you can negotiate shorter amortizations to see the debt paid off as quickly as possible – so there is no temptation to use money you’ve already paid off. See, best of all worlds.
Want to start your 2017 financial planning today?
Call Prudent Financial to find out more about how to use your home equity without taking out a second mortgage: 1-888-852-7647.