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Debt consolidation refinancing home improvement loan |
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Refinancing of home can release substantial amount of money which can be used for debt consolidation or for home improvement or for both. First let us consider from where this money is going to come for your debt consolidation. Let us try to understand the economics involved in this whole refinancing program. There are two parts involved here. First and most important part is equity built. The home goes on appreciating as it becomes older. Let us assume that you have bought your present home ten years back at the cost of say, $100,000. Assuming that generally homes appreciate at 5% rate per annum, its present value will be at least $150,000. I have deliberately avoided compounding to get minimum appreciation. In those last ten years let us assume that you have paid $60,000. This means you still owe $40,000 towards repayment of your home finance. This means you have 150,000 - 40,000= 110,000 worth home equity built. What happens if your total payment in last ten years was only 30,000? Your home equity becomes 150,000-70,000= 80,000. Thus this home equity depends upon your homes current value and how much you owe towards home finance payment. This home equity is
the amount which will be available to you for debt consolidation or home improvement or for both. It is true that home refinancing can be at lower interest rates in majority of cases. This means you get savings in interest charge and monthly payments. But in case of debt consolidation this becomes a secondary part. You are forced to go for debt consolidation when you are servicing high cost debts. Generally these include credit card type payments. In those debts interest rates are already too high and there are all types of hidden penalty charges. Here getting rid of these multiple high costs debt is the main motive and so one can not bother much about difference in current rate of interest and refinancing rate of interest. You must have a good equity. If you do not have good equity then, repayment may pose major problem. You may lose your home if you default on your payments. There can be home refinance program or two types of home equity loan programs. There are different pros and cons associated with every type of home refinance program. You will have to study online to get complete idea about debt consolidation refinancing home improvement loan program. Whether it is debt consolidation or home improvement or both you can achieve your target if you have good equity and financial discipline. Debt consolidation refinancing home improvement loan programs are useful; use them to change your economic future. Home Equity
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