3 considerations when choosing between a cash-out refinance, home equity loan or HELOC
When it comes to accessing the equity in your home, you have three main options: a cash-out refinance, home equity loan or home equity line of credit (HELOC). But how do you know which one is right for you?
Here are three key considerations to keep in mind when making your decision:
1. How much money do you need to borrow?
If you need to borrow a large amount of money, a cash-out refinance may be your best option. With a cash-out refinance, you can take out a new mortgage for the full value of your home, and use the extra cash to pay off other debts or make home improvements.
2. How long do you need to borrow the money?
If you need to borrow the money for a short-term project, a home equity loan or HELOC may be a better option than a cash-out refinance. With a home equity loan, you will get a lump sum of cash that you will need to pay back over a fixed period of time. With a HELOC, you can borrow money as you need it, up to your credit limit, and you will only be charged interest on the money that you actually borrow.
3. How much can you afford to pay each month?
When you take out a home equity loan or HELOC, you will need to make monthly payments. If you opt for a cash-out refinance, you will have the opportunity to choose between a fixed-rate or adjustable-rate mortgage. With a fixed-rate mortgage, your monthly payments will remain the same for the life of the loan. With an adjustable-rate mortgage, your monthly payments could go up or down based on changes in interest rates.
No matter which option you choose, be sure to shop around and compare offers from multiple lenders to get the best deal.