Your home is more than just a place to live—it’s also a powerful financial asset. If you need to tap into your home’s equity, two popular options are a Home Equity Line of Credit (HELOC) and a Cash-Out Refinance. But which one is the best choice for you?
Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit that lets you borrow against your home’s equity as needed, much like a credit card.
Best for:
- Home improvements or ongoing expenses.
- Borrowers who want flexibility to withdraw funds over time.
- Those who want to only pay interest on what they use.
Potential downside:
- Variable interest rates mean your payments could increase.
- You’re taking on additional debt while keeping your original mortgage.
What Type of Loan Are You Looking For?
Cash-Out Refinance
With a cash-out refinance, you replace your existing mortgage with a new, larger loan and receive the difference in cash.
Best for:
- Consolidating high-interest debt. (credit cards, personal loans)
- Large, one-time expenses. (home renovations, education, investments)
- Locking in a fixed interest rate.
Potential downside:
- A new mortgage means resetting your loan term.
- Closing costs can be higher compared to a HELOC. (If you do choose a cash out refi, be sure to work with a lender that charges $0 lender fees.)
Which Option Should You Choose?
- HELOC = More flexibility, great for ongoing or unpredictable expenses.
- Cash-Out Refi = A lump sum with a new mortgage, better for major one-time costs.
Still unsure? Schedule a consultation to speak with a loan officer and find the best option for your financial goals!
