Using Equity to your advantage.

When you make payments to your current mortgage, the biggest benefit to home ownership is building equity. A method known as 'cash-out refinancing' is good for those that have equity in the event of large purchases or financing their child's education. It is more advantageous to do 'cash-out refinancing' when the item that was purchased, has a similar life expectency as the loan. As a example. buying a second home or adding home improvements. Borrowing money against a loan can be a very good idea when interest rates are low and also the mortgage interest is tax deductable (check with your tax reresentative in your state). To use equity to your advantage, you can apply for a Home Equity Loan also called second mortgage loans and are available up to 85% of the appraised value of your home. Home Equity Loans often carry a higher interest rate depending on your credit and loan to value ratios on the property. The approval process is similar to going for a first mortgage and the draw periods can range from 5 years to 25 years, although typically 5, 10 and 15 years.

Other types of loans are called conforming loans and allow you to refinance 75% (sometimes 80%) of the value of the property and jumbo loans which only allow for up to 70% of the value of the property. If. for example, your home is valued at $200,000 and your loan balance is at $90,000, you might be able to get a new mortgage of $150,000 ($200.000 x 75% = $150,000). That would pay off the existing mortgage and use $60,000 for your financial needs.