A Home Equity Line of Credit (HELOC) and a cash-out refinance are two very different financing structures, and in most instances should be used differently. The route you choose will depend on how long you plan to be in mortgage debt or how long you plan to be in the home.
When is a Cash-Out Refinance the Way to Go?
If you can take out a 30-year fixed-rate, cash-out loan today, achieve an interest rate in the mid-3% range, AND you plan to be in the home for more than several years, a cash-out refinance probably the best way to go.
The downside with this structure is that you are going to have some closing costs associated with the loan. There will always be more closing costs on a cash-out first mortgage than on a home equity line of credit.
When is a HELOC the Way to Go?
If you plan on pulling money out of your home or just want to have some money available to you, and you are able to pay that money back quickly or plan on selling your home within a few years, then a HELOC is a great option for you.
Conclusion
The best loan product depends on how long you’re going to be in the home, your income, and how quickly you plan on paying down your mortgage.
Our job is to make your mortgage experience simple, low-stress, and fun. We’d love to show you both options and help you weigh the pros and cons of each with a free tool called the Total Cost Analysis.
If you would like to get started, fill out the form below. We look forward to hearing from you.
