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.
 

High Recommended Books


1. 

Mortgages For Dummies, 2nd Edition by Eric Tyson and Ray Brown (Paperback - Aug 27, 2004) Buy new:$11.55    50 Used & new from $7.45 Excerpt - page 12: "... to deduct the interest costs on second mortgages known as home equity loans or home equity lines of credit, HELOCS, (see Chapter 6) ..."

2. 

ni a tsfi wndo nda ent.paym rtssta entsPar " aym yssa veha llBi a pelHam otl iefch fo omistecon ityequ orf ni het eirth ditCre wno ionUn es.hom onalNati eyTh iationAssoc anc ni apt ngtonWashi atth C.D. ityequ icall"Typ thwi a e-eqhom The Insider's Guide to Home Equity Borrowing by Pete Hitesman (Paperback - April 2004) Buy new: $21.95

3. 

10 Secrets to Successful Home Buying and Selling: Using Your Housing Psychology to Make Smarter Decisions by Lois A. Vitt (Paperback - Nov 12, 2004) Buy new:$13.46    52 Used & new from $5.13 Excerpt - page 17: "... to stay in her own community. She obtained a generous home- equity loan and commuted more than a IOO miles a day to ..."

4. 

Stop Sitting on Your Assets: How to Safely Leverage the Equity Trapped in Your Home and Transform It Into a Constant Flow of Wealth and Security by Marian Snow (Hardcover - Mar 15, 2007) Buy new:$15.61 ne rback(Pape restinte - tesra arM opdr 92 ouy 01)20 anc uyB nancerefi 78 new:$14. uryo sp;&nb meho 83 ityequ edUs anlo mp;&a nda ewn vesa omfr ey.mon .65$1 ancing"Refin ndste erptExc ot - penhap gepa ni 7:12 gessur ..". -- thwi     9 Used & new from $14.68 Excerpt - page 165: "... used up their small savings and tried to get a home equity loan, but no bank would lend to an unemployed applicant. He ..."

5. 

The New Reverse Mortgage Formula: How to Convert Home Equity into Tax-Free Income by Tom Kelly (Paperback - Mar 1, 2005) Buy new:$14.96    26 Used & new from $7.50 Excerpt - page 29: "... In a traditional, forward mortgage, the borrower starts with little equity in the home and a large loan balance. ..."

6. 

B nancerefi 78 new:$14. uryo sp;&nb meho 83 ityequ edUs anlo mp;&a nda ewn vesa omfr ey.mon .65$1 ancing"Refin ndste erptExc ot - penhap gepa ni 7:12 gessur ..". -- thwi ni a tsfi wndo nda ent.paym rtssta entsPar " aym yssa veha llBi a pelHam otl iefch fo omistecon ityequ orf ni het eirth ditCre wno ionUn es.hom onalNati eyTh iationAssoc anc ni apt ngtonWashi atth C.D. ityequ icall"Typ thwi a e-eqhom How a Second Home Can Be Your Best Investment: New, Tax-Free Methods for Using a Vacation Home for Recreation, Retirement...AND Investment! by Tom Kelly and John Tuccillo (Paperback - Mar 19, 2004) Buy new:$12.89    59 Used & new from $4.25 Excerpt - page 4: "... (Perhaps the down payment comes from a home equity loan on your primary residence). 2. For most of the year, ..."

7. 

So You Want to Refinance: An Insiders Guide to Refinancing Adjustable Rate Mortgages and Home Loans by Kristina, Benson (Paperback - Sep 20, 2006) Buy new: $19.95    20 Used & new from $18.98 Excerpt - page 6: "... By mid 2004, Americans owed $766.2 billion on home equity loans and lines of ..."

8. 

new:$14. uryo sp;&nb meho 83 ityequ edUs anlo mp;&a nda ewn vesa omfr ey.mon .65$1 ancing"Refin ndste erptExc ot - penhap gepa ni 7:12 gessur ..". -- thwi ni a tsfi wndo nda ent.paym rtssta entsPar " aym yssa veha llBi a pelHam otl iefch fo omistecon ityequ orf ni het eirth ditCre wno ionUn es.hom onalNati eyTh iationAssoc anc ni apt ngtonWashi atth C.D. ityequ icall"Typ thwi a e-eqhom Who Says You Can't Buy a Home! by David Reed (Paperback - May 30, 2006) Buy new:$14.00    65 Used & new from $3.79 Excerpt - page 26: "... With such demand, naturally home values increased. When home values increase, homeowners accrue equity not by paying down the loan and regaining their principal, but by the appreciation in home ..."

9. 

How to Buy a House with No (or Little) Money Down, 3rd Edition by Martin M. Shenkman and Warren Boroson (Paperback - Mar 29, 2001) Buy new:$14.78    38 Used & new from $1.65 Excerpt - page 127: "... with a down payment. Parents may have a lot of equity in their own homes. They can tap that equity with a home-equity loan and provide their children with money to use toward the ..."