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When you want to refinance a mortgage loan, consider a home equity loan. The rate for refinancing a mortgage is usually lower than the initial interest rate on your mortgage and it depends on the amount of equity you have built up in your home. Home equity refers to the difference in the amount of the outstanding balance of your mortgage and the amount of money you would receive if you sold your home. In most cases, you can refinance your home by taking out a second mortgage a home equity loan.

Most lenders will refinance a mortgage loan for 80% of the equity. However, you can get much more than that. Some lenders will even give you 125% of that equity giving you more money to work with. Although the majority of homeowners refinance the mortgage rate and mortgage to get funds to consolidate their debts, the second biggest reason for refinancing is to make home improvements. When you use the money from the equity in your home to make additions and improvements, you build more value and this increase the equity.

The 125% home loan is a second mortgage that lets you borrow 25% more than the value of your home. With this option you have more money to work with. When you make improvements, you will easily increase the value of your home to more than 25% extra you received in cash. You can use the extra money to pay off other loans, place a large payment on your mortgage or even take a trip if you wish.

There are other ways to get more out your home equity loan when you refinance your mortgage loan. The mortgage rate on a home equity line of credit is based on your current balance and not on the total of the loan. Instead of paying the same payment each month, the payment varies according to the interest. While a second mortgage or a 125% home loan is only a one-time thing, with a home equity line of credit you always have the funds at your disposal. You can repay the money and use it again when you need it. Even if you have only made a few payments and need a bit of extra cash, you can get the money you need from the line of credit.

A home equity loan is the most common method for refinance. Mortgage loans may have carried a high rate of interest when you first took out the mortgage and by refinancing you can lower the monthly payments because of the lower mortgage rate. The rate of interest on a mortgage may also differ from one lender to another and the amount of money you can borrow based on the equity in your home may differ as well. It is wise to check around when you are considering this option.

Searching online will give you a long list of lenders to whom you can apply to refinance. The mortgage rate is included in the free loan calculator on most of the sites, so you can do the calculations before you even apply.

Richard Cunningham is a successful entrepreneur and publisher of several profitable websites on Homeowner Insurance and Mortgage Refinancing.