Should I Refinance... or Get a Home Equity Loan?

Need cash? Want to lower your monthly payments?

The secret may very well be hidden in your home. You may be surprised at the treasure you already own!

Visit our lendnig partner Verde Vista to discover the best way to tap this resource, or continue reading to find out more.

Refinancing or Home Equity Loan... What's the difference?

Refinancing, sometimes simply called a "Refi", is when a new loan is written that replaces the existing loan(s) on the home. Refinancing your home may give you 1) a reduced interest rate and/or 2) a longer payment plan. Either option can lower your monthly payments. Another option is to lower your interest rate and shorten the length of your loan, enabling you to retire your debt faster.

Home equity loans come in two varieties. The first is sometimes called a "Cash Out" or "Consolidation" loan, where you refinance your existing debt on the home, and convert some of your remaining equity into cash. Depending on current market conditions, you may be able to get a lower interest rate than your current mortgage, AND walk away with cash!

The second type of home equity loan is one that would normally come from your local bank. With this type of loan, you get an additional mortgage on your home (usually a second), leaving your original purchase mortgage intact. The second loan has a separate interest rate and payment plan. If your original mortgage already has a good interest rate, then this is usually the best way to pull equity out of your home, and use to pay for other things. Your local bank may offer very competitive interest rates for this type of loan, and can even give you a bank card that makes it very convenient to tap this cash.

Home equity loans are often used to pay off car loans, boat loans or credit card debt. This is a smart move, as these other types of loans usually carry higher interest rates. Another great use of home equity is for a down payment on investment property. In addition, the interest on a home equity loan is usually tax deductible. Consult your tax professional to find out how this can both cut your regular monthly expenses, as well as increase your take home pay.

One final difference is that you can typically refinance a greater percentage of the value of your home, while home equity loans are sometimes more limited by state laws and local banking policies. If you would like to discuss your options with a professional, please use the contact Contact Request Form.