Cash-Out Refinance versus Home Equity Loans

Let's say you have a home that's worth $150,000 and you owe $100,000 on the mortgage. That means you have $50,000 of equity in your home, which is like having $50,000 in a savings account. A Cash-Out Refinance allows you to access that equity. For instance, if you need $10,000, you can refinance your mortgage so that you owe $110,000 and the Mortgage Lender then gives you $10,000 in cash at closing.

With a Home Equity Loan, you keep your Original Mortgage and Take out a Second Mortgage for the amount of equity you are tapping into.

Since every home owner's situation is different, your Best Refinancing Option will depend on your specific circumstances and Current Mortgage Interest Rates. OnlineBestMortgage has several Mortgage Options to choose from. When you compare home equity loans and cash-out refinance further, there are four things you should consider in order to determine Which Is the Best Loan Option for You:

Speed

How fast do you need the money? HOME EQUITY LOANS close considerably Faster than a Refinance – in as little as five days. That might be important to you.

Cost

Home equity loans typically require minimal fees. Refinancing, on the other hand, may carry higher loan fees and possibly points.

Rate

Because a Home Equity Loan Is a Second Mortgage, it typically has a higher rate than a cash-out refinance (a reflection of its higher risk to the lender). But if you already have a great rate on your mortgage, it may be worthwhile to get a home equity loan — even at a higher rate — rather than refinance and lose the low rate you already have on your first mortgage.

Term

When refinancing, you are generally limited to a term of 15 or 30 years. With a home equity loan, you have more flexibility and can take advantage of a shorter term loan— greatly reducing your overall interest costs.

Onlinebestmortgage Expert can help you compare a cash-out refinance or a home equity loan. With your own personal mortgage expert to guide you, you'll have no trouble determining which type of loan is right for you.

If you still have questions, please refer to the following detailed differences between Cash out Refinance and Home equity Loans. We can help you determine which Refinancing Option is best for your situation.

Cash out Refinance

• Your existing mortgage is Refinanced for a Higher Overall Amount using some of the accumulated equity in your home.
• One loan and one loan payment
• Choose from Fixed Or Variable Interest Rate Loans.
• Get cash and spread the payments out over a longer term.
• Lower Interest Rate than Home Equity Financing may be available.

Home Equity Financing

• You can borrow all or just part of your home's equity - the difference between your mortgage balance and your home's estimated market value.
• You can choose between a lump sum loan or a revolving line of credit.
• Loans have fixed-rate interest, and lines of credit have variable-rate interest.
• A home equity loan can offer the flexibility of a shorter term to help to build equity faster because you can pay the loan off sooner OR reduced monthly payments by spreading the cost over a longer term.
• You can borrow up to 100% of the value of your home.
• With a line of credit, you only pay interest on the money you actually use, and you can access it whenever you want without having to reapply.