Cash-out refinance vs. home equity line of credit (HELOC) vs. getting a reverse mortgage: what to consider
If you're a homeowner, you may be able to tap into your home equity to get cash. There are several ways to do this, including a cash-out refinance, a home equity line of credit (HELOC), and a reverse mortgage. Here's a look at how each one works and what you need to consider before you decide to go ahead.
A cash-out refinance involves taking out a new loan that is larger than your existing mortgage. You can use the extra cash to pay off debt, make home improvements, or for any other purpose. This option can be a good way to get cash out of your equity if you have good credit and can qualify for a loan with a low interest rate.
A HELOC is a line of credit that you can use as needed, up to a certain limit. This can be a good option if you need flexibility or only need to borrow a small amount of money. However, HELOCs typically have variable interest rates, so your payments could go up if rates rise.
A reverse mortgage is a loan that allows you to tap into your home equity without having to make monthly payments. The loan is paid off when you sell your home or pass away. This option can be a good way to get cash to cover expenses in retirement, but it's important to understand that you could end up owing more than your home is worth if the value of your home decreases.
Before you decide which option is right for you, it's important to understand the pros and cons of each one. You should also compare interest rates, fees, and terms to make sure you're getting the best deal.