The home equity refinancing loan is a full and new loan in place of the existing mortgage. Here the old mortgage is cleared by the new mortgage and the advantage is that the new mortgage has a lesser interest rate.
There are many positive features when a borrower goes for refinancing his loan. The benefits could be that the borrower is able to get a lesser rate of interest when compared to the existing equity loan. There is also a chance that he might have accepted a rate of interest which is greater than the existing one. Thus by refinancing the borrower can benefit from lower rate of interest if the refinancing is timed wisely.
Another positive feature of home equity refinancing is that a borrower can actually decrease the monthly payments. This can be done by using the low rate of interest or by the difference in the accumulated equity. For instance if the balance of this loan is paid over a period of time then the monthly payment for the current balance will considerably be reduced by refinancing.
Another advantage of refinancing is that the borrower can get a greater sum of money. Usually when the loan amount is received the first time there are chances that the money is used for other purposes too. But if the balance is paid then there are chances that you can borrow a larger sum with refinancing for various other needs.
Though this has its advantages it has to be considered only when the market is ideal that is when the interest rates in the market at that given point of time are low. The existing home equity interest and the current market rate have to be compared. Secondly when home equity refinance can be considered is when there a considerable amount of financial requirements to be taken off. This loan is ideal even in times of emergency.
Before going for it, an initial research has to be done in the market. This will not only help to find out the best offer on interest rates but also the charges levied by different lenders. So it is always a better option to see a few lenders before making a final choice.
Refinancing can be done as soon as the lender agrees but the rules for the lender vary frequently. Generally banks expect a seasoning period of minimum one year before refinancing.