When to Refinance - The Bills.com Blog

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When to Refinance

Question: I have owned one house for almost 6years and I haven't refinanced... and now i wanted to refinace my house and try to pull out my home equity to renovate my house. My question is is this a good idea? How does home equity works??? Please answer me.. im getting confused

Answer: That is a good question, and an important one since your home is most likely your number oneasset.

Home equity is the value between what your home is worth (in a sale, or an estimate of this determined by an appraisal) and the amount you owe on a mortgage(s). You can frequently 'tap' that value by either refinancing your home, and increasing the total size of your first mortgage, or by taking out a second mortgage,

often called a Home Equity Line of Credit (HELOC).

If you are looking to borrow money to perform renovations, a home loan is almost always your best route, since you get a low rate and the interest is tax deductible. The question will be whether you want to refi the whole loan, or to get at HELOC. The benefits of a refi

are primarily that you can take out more money and that the rate is almost always lower than a HELOC. The benefit of a HELOC is that you can draw down the cash when you need it, giving you more flexibility, and if your current rate is locked in at a low rate... you don't need to adjust your first mortgage.

Also, make sure to get a free financial health check-up with Bills IQ!

User Comments

1. Posted by Anthomy Hamilton on Saturday 26th May 2007 13:54

i want to refinace my home or something to help me get out of all the bills and have just one bill but i have only owned my house for one year is there anyway to do this

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Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!

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