The Advantages of Refinancing and Home Equity Loans in Texas By Allison Beatty Want to make the most out of the current interest rate climate in Texas? Here’s a look at how to make mortgage refinancing or a home equity loan work to your favor.

Mortgage refinancing and home equity lending have seen record highs in Texas in recent years. As the markets return to a slower pace, however,  is more important than ever to understand the advantages of each financing method.

With mortgage refinancing, a lender pays off the current mortgage and issues a new one. Many Texas homeowners pursue this option because it allows them to lower their interest rate and save money over the long term. This type of financing is best used when current interest rates are a half a point or more lower than the existing mortgage. It also is a good option for those who want to lower their rates and take cash out at the same time.

In order for a refinancing to make sense, a homeowner should find an interest rate that is at least one-half a percentage point lower. Other factors to consider are the fees for refinancing, such as appraisal fees, attorney’s fees and title fees. Some mortgage lenders waive fees, so it pays for homeowners to compare.

Home equity loans also have become a popular financing tool for Texas homeowners. A home equity loan is a second mortgage on a home, making it a good financing option with a low interest rate.

Home equity loans can be used for a variety of purposes, from college expenses to home repair and major remodeling. A home equity loan makes sense when a homeowner has a favorable interest rate on their first mortgage and does not want to lose that through a refinancing.

The interest homeowner’s pay on home equity loans often is tax deductible, making it more attractive. (See a financial advisor for details).

Another way to access cash is through a home equity loan, which is a second mortgage on a home. In the Texas marketplace, many homeowners like this type of financing, as it allows them to hold onto a lower interest rate while still tapping into home appreciation.

A home equity loan typically is established for a four-year period and has equal monthly payments. The funds can be used to finance a variety of expenses, from home repairs to new automobiles or health care fees. Interest payments also may be tax deductible.