Using Home Equity to Ease Financial Problems

By Karen Lawson
Local Lender Columnist
Jun 22, 2007
Your mortgage lender has notified you that your mortgage payments are going up. What can you do to get your budget back on track?

Refinancing your mortgage may provide a solution. Home equity financing, which can include refinancing, home equity loans and lines of credit, is largely based on the amount of equity you have in your home. You don't necessarily need good credit to qualify.

Home Equity Affected by Market Trends and Other Factors

Before you take out a home equity loan or refinance your mortgage, you'll want to establish how much equity you have. You can get an estimate by using free calculator tools provided online. Let's consider home equity financing options. If you refinance to take out additional cash, your loan to value ratio should remain at or below 80%. As an example, if your home is worth $200,000, you can avoid paying mortgage insurance premiums by borrowing $160,000 or less.

A real estate professional can give you specific details about Las Vegas market trends. If refinancing would increase your LTV to more than 80%, you may want to take out an equity loan (for a specific amount of cash) or open an equity line of credit, which allows you to draw funds as needed. Home equity loans are typically rate products, so it's important to understand how and when they will adjust. A primary reason homeowners take cash from equity is for debt consolidation. Paying off high interest debts can potentially save money and provide additional cash each month. Seeing a credit counselor or financial planner can also help you decide if and when to borrow against your home equity.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds a Master's degree in English from the University of Nevada, Reno.