The equity in a home builds up over time and once it has accrued there are options to draw this money by refinancing or extending the home loan or mortgage. In doing this borrowers are able to either remain with their current lender, or move to another lender.

The refinance of a mortgage or home loan

When borrowers refinance their loan to access the equity or a better interest rate, the home might be revalued so that the equity in the property can be used, or the borrower may simply shift the remainder of the loan to another lender.  If opting to refinance a property, the borrower may be able to shift to a lender with a smaller interest rate, opt for a smaller monthly payment over a longer period of time, or even increase their borrowing capacity. The individual should assess which of these options is most advantageous depending on their financial needs and monetary situation.

Managing a car loan, loan or credit card

In the present economic climate people are using the equity in their homes to look at consolidating debt and eliminate high interest rates on credit cards, car loans and other loans. If considering refinance or drawing equity from a mortgage or home loan – there are several aspects to consider. Firstly, if interest on the loan, car loan or credit card is low, then it may be better to continue paying this over a longer period by combining with your home loan.

Secondly, the borrower should be realistic about their ability to meet the debts and keep their credit card or other borrowing down. If the borrower refinances their home loan and then runs up a large credit card debt again straight away – the value of the refinance of the mortgage is lost. They may well end up with an unmanageable amount of debt and even put their home at risk!

Credit and credit rating

Managing credit and the credit rating is important at every stage – but even more so in these current difficult economic times.  One effective way to manage the credit rating is for the borrower to make payments consistently and ensure that they meet the minimum requirements each month. This can be on either a credit card or any other loan that they may have. Consistent repayments are a sure way to manage credit rating and keep a good rating, or even improve a poor credit rating.