Just about everyone in the United States has a debt balance. This debt is typically made up of credit cards, auto loans, personal loans, and mortgages. If you feel like your debt is consuming too much of your monthly income then you may want to consider using the equity that you have in your home to pay off your debt.
Determine How Much Equity You Have to Borrow
The equity that you have to work with is based on two factors. The first factor is how much your home is worth. This value should be based on current market values and not on what you paid for the home. To get this value you can either compare your home to similar homes in the area or you can get an official home appraisal. The cost of a home appraisal will vary depending on where you live, but you should expect to pay around $450. The second factor is how much you still owe on your home. You should contact your lender to see what your current pay off value is for your home loan.
Determine How Much Debt You Have to Pay Off
Your next step is to determine how much debt you have. To do this you will need to request your credit report. Use your credit report to determine what the balance is for all of your open accounts and loans. Compare Your Home Equity to Your Debts
Before you apply for a home equity loan you should determine if you have enough equity in your home to cover your debts. As you compare your debts to your equity you may want to create a few different scenarios. Your first scenario is to compare your total debt to your total equity. If you have more debt than equity then you may need to prioritize your debts and select the debts that you would most like to pay off with a lower interest rate debt consolidation loan. After you have a debt to equity scenario that works for you, you can start searching for a lender.
Find a Lender
With your equity balance and debt balance in hand you are now in a great position to start searching for a lender. A good place to start is with your current banker. If your banker doesn't have a loan program that you like then you have the option to shop around. If you decide to shop around you may want to start with a mortgage broker. They will be able to tell you about the refinancing and 2nd mortgage options that are available to you. Finally you can research lenders that advertise nationally like Quicken Loans and Ditech. As you talk to different lenders make sure that you ask about closing fees, interest rates, terms, and program options. You will want to compare all of these things before you select a lender to work with.
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