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What to know before refinancing your home equity loan
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With the Federal Reserve’s recent action to lower the federal funds rate and home loan rates trending downward in recent months, the interest outlook is turning the corner. Consequently, many homeowners who had been waiting for lower rates have now tapped into their home’s equity for cash.
Since home equity loans are secured by your home, they often come with more favorable interest rates than credit cards and personal loans. A home equity loan refinance can be a wise choice if your current loan has a higher interest rate than what’s available today. As of October 15, the average home equity loan rate is 8.36%.
Even a slight rate drop of half a point to a point may save you tens of thousands of dollars over your loan term, depending on your loan amount, bank and other factors. But if you’re considering this option, there are some things you should know before proceeding.
See what new home equity loan rate you could qualify for here.
What to know before refinancing your home equity loan
Ready to refinance your existing home equity loan? Remember these five things before you do:
Shop around for the best rate
Remember, home equity loan rates can vary widely from lender to lender. As such, it’s wise to compare quotes from multiple lenders to improve your odds of landing the best refinance interest rate.
According to Aaron Gordon, branch manager and senior mortgage loan officer at Guild Mortgage, skipping this critical step is the most common mistake homeowners make. “Start with the bank or credit union you have a current banking relationship with and then contact one or two other non-bank lenders.”
Start exploring your home equity loan options online now.
Home equity and credit score matter
As Gordon notes, your home equity and credit score also factor heavily into the refinance rate you receive on a home equity loan. Higher credit scores generally lead to more favorable rates—the lower, the better. However, you can still refinance with a lower credit score, but your rate may be higher.
“Home equity lenders look at your credit score and the amount of home equity you have when pricing your loan,” he says. “The more equity you’ll keep in the home after this loan will get you a better rate.”
Overborrowing could have serious consequences
When you refinance, you essentially take out a new loan at a lower rate than your current one. Right now, with rates falling, it could be tempting to overborrow. Home equity loans and lines of credit are considered second mortgages that use your home as collateral for the loan. Consequently, your lender could foreclose on your property if you fall behind on your payments. That’s why it’s essential not to overborrow, even at today’s lower rates, and to make sure you can comfortably afford the monthly payments.
“A home equity loan can be a powerful tool in making extensive and expensive upgrades to your house to hopefully add value to your property, but it can also be incredibly risky if not executed properly,” says Alex Beene, a financial literacy instructor for the University of Tennessee at Martin. “The amount borrowed needs to be manageable and fairly uncomplicated to pay back over time at your existing income level.”
Other considerations
Home equity loans are a popular lending option, in part because you can use the money to improve your financial profile. Many borrowers use the funds to consolidate debt or for home improvement projects that boost their home’s value.
As Beene notes, “If you’re not using the amount to in some way add financial value to your net worth, it’s not a smart decision. Home equity can be a tool for using additional financial resources to boost your home’s value long-term, among other things. However, if you’re looking at it as just a fresh injection of cash to get what you want, you’re probably not doing it for the right reasons.”
The bottom line
Most lenders allow you to borrow up to 85% of your home’s value. However, the amount you might borrow should take into account your unique financial situation. It’s imperative to borrow only what you can comfortably afford now and over the loan term, even if today’s lower rates make it tempting to withdraw more equity.
Sundance Head, the 2016 winner of “The Voice,” is recovering after an accidental shooting at his ranch in Texas, his publicist told CBS News.
The 46-year-old Houston native – whose name is Jason Head – was putting a gun away at his ranch when it “slipped out of the holster, hit the side of the jeep and discharged into his stomach area,” the singer’s publicist Trey Newman told CBS News in a statement on Saturday.
Newman said the bullet missed any vital organs and the singer is expected to make a full recovery.
In a post on Head’s official Facebook page, his wife Misty offered updates after the incident and asked for prayers.
Tyler Golden/NBCU Photo Bank/NBCUniversal via Getty Images
In the post, she said that after the bullet hit Head, he ran to the end of the road to flag down a car that could help him.
“He’s so lucky and grateful to be alive. Thank you to the Good Samaritan who stopped and helped and the fast response by life flight and the doctors,” she wrote.
Misty added that the bullet was logged in the fatty tissue of his stomach and that “him being on the bigger side was a good thing.”
“Prayers answered as no internal damage was done by the bullet. Thank you all for the prayers,” she said.
Head first rose to fame after a 2007 appearance on “American Idol,” where he revealed he is the son of singer Roy Head. He went on to compete on “The Voice” in 2016 as part of Blake Shelton’s team and he was crowned the winner.
CBS News
10 newborn babies killed after fire engulfs hospital ward in northern India, injuring 16 others, authorities say
A fire tore through a neonatal intensive care unit in a hospital in northern India, killing 10 newborn babies and injuring 16 others, authorities said.
The fire occurred late Friday at a hospital in Jhansi city in India’s Uttar Pradesh state. Officials said the blaze spread quickly through the ward, where 55 infants were being treated. Forty-five babies were rescued and are receiving medical care, said Bimal Kumar Dubey, a local official.
It was not immediately clear what sparked the blaze. Brajesh Pathak, the deputy chief minister of the state, visited the hospital and met with families on Saturday. He pledged government support for the victims’ families and promised a thorough investigation.
“We will identify those responsible for this tragedy and take strict action. The government stands with families during this difficult time,” he said.
AP
When the firefighters arrived, the ward was engulfed in flames and plumes of smoke. Rescuers had to break through windows to reach the newborn babies. Eyewitnesses said the rescue operation began about 30 minutes after the fire erupted, delaying evacuation efforts.
The accident has raised questions over the hospital’s safety measures. While fire alarms had been installed in the intensive care unit, parents and witnesses said they did not activate during the blaze. Hospital staff acted only after they saw signs of smoke and fire.
“If the safety alarm had worked, we could have acted sooner and saved more lives,” said Naresh Kumar, a parent who lost his baby.
Akhtar Hussain, whose son was rescued and is receiving treatment in an adjacent ward, agreed that the tragedy could have been prevented if the hospital had better safety protocols.
Fires are common in India, where building laws and safety norms are often flouted by builders and residents. Poor maintenance and lack of proper firefighting equipment in the country also leads to deaths.
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