Use my equity
Home ownership comes with many rewards, not the least of which is being able to borrow money at a low interest rate from the equity you’ve built up in your investment. The cash you borrow can be used for anything you want—consolidating debt, home improvements, paying for college, starting a business, etc.
When borrowing cash from your home, the first thing you need to decide is whether to refinance your current mortgage or to take out a home equity loan (sometimes referred to as a “second mortgage”) or line of credit. One of our Topdot mortgage specialists can help you make this decision.
Contact us now, or read on to find out more.
Cash-out Refinancing vs. Home Equity Loans
We’ll start by defining what your options. “Refinancing” put simply is replacing your current mortgage with a new one. “Cash-out refinancing” is a replacement mortgage that allows you to borrow more so that you can use some of it as cash. “Home equity loans” are in addition to your original mortgage and are often called “second mortgages.” With a Home Equity Loan, you receive a lump sum that gets deposited into your bank account. A “home equity line of credit” is like a Home Equity Loan, but rather than receiving the money all at once, you draw from the loan the same way you would a checking account. The benefit is that you pay interest on only the portion of the HELOC that you use and you can continue to draw from and pay down your HELOC through the life of the loan.
There are many in the mortgage industry that will tell you a home equity loan or HELOC is less expensive and faster than refinancing. This type of thinking is based on shallow knowledge and may not have your best interest in mind. At Topdot, we recommend that you first make sure you’re in the right first mortgage before considering a second one. You may be paying too much or have a term that isn’t right for your situation. Plus, having more than one mortgage means multiple banks to deal with and multiple payments to make each month. Refinancing may enable you to improve your first mortgage and build in the cash you need. It’s a double win. Speak to a Topdot mortgage specialist to help evaluate if you should hang on to your first mortgage and refinance.
Once you establish that there’s not a better alternative to your first mortgage, you can look at home equity loans and HELOCs.
