You may be thinking about refinancing your home in Palatine. Refinancing can accomplish three things: decrease your interest rate, decrease your monthly payment, or cash out your equity. When you refinance, you pay off your old mortgage and take out a completely new loan, and you can either refinance the amount you currently owe on your home, or you can refinance the entire value of your home.
When you refinance the amount you currently owe on the home, you save money by getting a lower interest rate. You should have a lower house payment and be able to pay your home off sooner than you could with your original loan.
When you refinance the entire amount, you “cash out” your equity. It is like starting over with a new home loan, but you have a certain amount of cash to use for other expenses. Sometimes when you are overwhelmed with high credit card debt, or have emergency medical expenses, it is a good financial decision to use your equity. The interest is nearly always lower than it would be on a conventional loan or a credit card, and it can usually be deducted on your income taxes.
Home Equity Loan
A home equity loan is also called a second mortgage. Similar to refinancing, it allows you to liquidate and use the equity in your home. The difference is that you continue to pay on your original mortgage as well, instead of including it in the new loan. This means that you will have two home loans.
You would choose a home equity loan if you have quite a bit of equity and if your original mortgage has a great fixed interest rate that you do not want to lose.
Home Purchase Loans
If you are interested in buying a home in Palatine, you will be taking out a new mortgage. You will be shopping for a new home and a new home loan. This is a good time to buy a home in Palatine because the real estate market is pretty stable, and interest rates are very good.
Whether you are looking for a home purchase mortgage, refinancing or taking out a home equity loan, you have several options.
Fixed rate loans: Fixed rate loans keep the same interest rate for the life of the loan. They are a good choice when interest rates are low. Some people prefer the predictability of a fixed rate loan because they know that their house payment will always be the same amount every month, no matter what changes occur in the market.
Adjustable rate mortgages (ARM): The interest rate on adjustable rate mortgages varies. Your loan contract determines how often your interest rate adjusts to correspond with the prime lending rate. ARMs are a great choice when interest rates are decreasing; however, they are not a great option when the interest rates are increasing. If you choose this option make sure that you can compensate for the changes in your monthly payments.
Hybrid loans: There are several types of hybrid loans, but they all combine a fixed rate loan and an adjustable rate loan. Currently, most hybrid loans start out with a very low fixed rate and convert to an ARM after a set period of time.
If you are looking for a home loan in Palatine, Illinois, we can help. Please fill out the form below and one of our representatives will contact you.
