| Refinance loans and home equity loans both give you | | | | Loan Interest Isn't Always Tax Deductible |
| an opportunity to get cash when you close on the loan. | | | | Contrary to popular belief, the interest paid on a home |
| While both options can be a great way to save | | | | equity loan or a refinance loan isn't always tax |
| money and get money, there are certain things you | | | | deductible. Before automatically assuming that you will |
| should know before getting a refinance or home equity | | | | be able to get tax savings, you should speak with a |
| loan: | | | | qualified accountant. An accounting professional will be |
| You Need a Good Reason to Get a Loan | | | | able to look over your situation, as well as the potential |
| It doesn't matter if you are considering a refinance loan | | | | loan to determine whether or not you are eligible for |
| or home equity loan; you need to have a good reason | | | | tax deductions. |
| for spending the money it will take to close on the loan. | | | | There is No Such Thing as a Free Loan |
| Good reasons may include the need for a better rate | | | | Don't be fooled by lenders who offer no closing cost |
| and terms or the need for cash to consolidate debt or | | | | refinance loans or home equity loans. There is no such |
| pay other outstanding bills. Whatever it is, make sure | | | | thing as a free loan. If you don't pay the costs upfront, |
| the loan will save you money in the long run, and more | | | | you will pay for them later on in the loan. While this |
| importantly, make sure you can afford the new loan | | | | may not seem so bad, you need to remember that |
| payments. | | | | you will also be paying interest on anything not paid |
| Refinance Terms Vary | | | | upfront. |
| Not every refinance loan is the same. Some have | | | | Negative Amortization Loans are Risky |
| lower payments during the term and one final balloon | | | | Though they are not as popular as they once were, |
| payment at the end. Some terms last 30 years, while | | | | negative amortization loans are still offered by lenders. |
| others only last 15. If you will be getting a refinance | | | | These loans present a great risk to the borrower |
| loan, make sure the terms will be manageable for you. | | | | because loan payments aren't always enough to |
| Home Equity Loan Terms Vary | | | | cover the required interest payments. Any unpaid |
| Like refinance loan terms, home equity loan terms can | | | | interest will be added to the unpaid principal, making it |
| also vary. Some loans are adjustable rate options, | | | | very difficult to pay the loan off in a timely manner. |
| while others are fixed. Term lengths can also fall all | | | | Tax Assessment Aren't Genuine Appraisals |
| over the map, so it is a good idea to evaluate all of the | | | | If you are thinking about getting a refinance loan or |
| options available to you before making any final | | | | home equity loan, don't assume that the local tax |
| decisions. | | | | assessor's appraisal represents the actual market |
| Introductory Rates Can Be Misleading | | | | value of your home. Tax assessments aren't genuine |
| Sometimes known as "teaser rates", introductory rates | | | | appraisals. Your home may be worth quite a bit more |
| look good on paper, but can be very misleading. | | | | or quite a bit less than the amount indicated on your |
| Before being drawn into a loan with introductory rates, | | | | tax assessment. The only way to find out how much |
| you should have a clear understanding of when the | | | | your home is really worth is to contact an independent |
| rate will adjust, what the rate cap is, and what your | | | | real estate appraiser. |
| payment might be at its highest. | | | | You Can Back Out |
| Fees Need to Be Compared | | | | Federal law gives you the opportunity to back out of a |
| When most people are looking for a refinance or a | | | | refinance loan, a home equity loan, or any other type |
| home equity loan, they compare interest rates. While | | | | of loan that will be using your home and property as |
| this is a smart thing to do, interest rates aren't the only | | | | collateral. You have a total of three days to change |
| thing that should be focused on in the comparison | | | | your mind after the loan has closed. If you are unsure |
| process. Because lending fees and closing costs can | | | | about the loan for any reason, this window of |
| vary from lender to lender, you also want to take time | | | | opportunity is your chance to get out before it is too |
| to make comparisons between these variables. | | | | late. |