Can a home equity loan be refinanced? Generally, people who hold this type of loan can refinance it as long as they meet certain criteria. Working with a trusted mortgage broker in Sugarland, TX, can help the process go smoother.
Learn more about the refinancing process for this type of loan.
Reasons to Refinance a Home Equity Loan
You will have to pay some closing costs and other fees when refinancing a home equity loan. If you’re trying to lower an interest rate on the loan, make sure that the benefits from the lower rate will outweigh these upfront costs.
You want to be certain that refinancing is the best option before signing the new loan papers. Some of the primary reasons people refinance their existing home equity loans include:
- Reducing monthly payments
- Reducing the interest rate
- Funding a new project
- Taking advantage of increased home value
- Paying off the loan faster
Steps Required for Refinancing a Home Equity Loan
Can a home equity loan be refinanced without treating it like a new loan application? Unfortunately, some banks will treat the process like a new loan. Others may let you use much of the information from the original loan, simplifying the process.
The steps required may vary depending on how long ago you took out the original loan.
Proving Your Income
Even if you took out your original loan recently, the bank will want you to prove your income again. You may need to provide documents including:
- Pay stubs
- Tax forms
- Bank statements
- Proof of employment
Appraising the Home Again
Some lenders will require you to pay for a home appraisal before approving a refinance request. If you established the first home equity loan recently, though, some lenders will waive this requirement.
Watching Your Credit Score
No matter what type of loan you’re requesting, trying to maximize your credit score is important. People with lower credit scores will receive more favorable loan terms.
If your credit score is significantly better now than it was when you took out the first home equity loan, you should receive far more favorable terms this time.
Learn More About Refinancing a Home Equity Loan
Can a home equity loan be refinanced and is it worth it? It can be worth reworking it if you want improved loan terms.
To learn more about your options in the Houston, TX, area — including the relationship between home equity loans and taxes — trust the professionals at Champions Mortgage Team. We can answer questions regarding closing costs or the interest rate when refinancing. Call us today at (281) 727-2500.
Frequently Asked Questions
Learn more about the options when refinancing a home equity loan.
When You Refinance, Can You Increase the Loan Amount?
If you need to borrow more money, you can attempt to refinance the home equity loan and increase the loan amount. The bank might have to appraise the home’s value again, though.
What Is the Maximum Home Equity Loan I Can Take When Refinancing?
The maximum home equity loan is typically about 80% of the value of the house. If you want to increase the loan amount when refinancing, though, some banks allow you to exceed 80%.
Is It Hard to Refinance a Home Equity Loan?
No, it usually is not hard to rework a home equity loan. As long as you have a good credit score and your home is in good condition, qualifying to refinance can be easy.
Can a Home Equity Loan Be Refinanced with Low Closing Costs?
Yes, you can refinance a home equity loan with lower-than-average closing costs. The typical closing costs range from 2% to 5% of the loan value, so shop around to find low costs.
