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Home Equity Basics
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Refinancing a home equity loan

When interest rates drop, you can refinance your home equity loan and save money.

"Refinancing tends to happen in surges -- in fits and starts," says Bill Hampel, chief economist for the Credit Union National Association in Washington, D.C. "Typically, rates should fall a point or more before you do it."

Refinancing entails closing costs and other fees, so it's important to know whether lower monthly payments will offset that cost. Consider how long it will take you to break even. For example, if refinancing costs run you $2,500 and your payments are $100 lower each month, it will take you 25 months to break even.

5 reasons to refinance
  1. Lower interest rate.
  2. Opportunity to convert all or a portion of your equity loan from an adjustable rate to a fixed-rate installment loan.
  3. Obtain a shorter-term loan to build new equity more quickly.
  4. Avoid a balloon payment.
  5. Extract more cash from equity.



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