-Deciding whether to refinance or get a home equity line of credit (HELOC) on your home can be a complex decision and Marc Coons, one of the best mortgage lenders in Paso Robles, is the person to ask. Basically, refinancing is replacing your current mortgage with a new one, typically with better terms and a lower interest rate. A HELOC is a revolving line of credit that is secured by your home.
Either option can help you achieve the desired financial goals, however, making best decision requires careful consideration of various factors. Here is a look at the pros and cons of each option.
Refinancing can result in lower monthly payments, reduced interest expenses over the life of the loan, or both. Refinancing can also allow you to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, providing more stability and predictability in your monthly payments, or change the term of the loan.
One advantage of refinancing is that it can help you consolidate high-interest debt, such as credit card balances or personal loans, into a lower-interest mortgage. This can save you money on interest charges and simplify your finances by reducing the number of monthly payments you need to make.
Another potential benefit of refinancing is that it allows you to access your home equity. “Equity is the difference between your home’s value and the amount you owe on your mortgage,” informs the Paso Robles mortgage lender. Depending on how much equity you have, you may be able to refinance and take cash out, which can be used for home improvements, debt consolidation, or other expenses.
However, refinancing also comes with some potential drawbacks. For example, it can be expensive, with closing costs and other fees adding up to several thousand dollars. This means that you need to make sure that the potential savings from refinancing outweigh the costs.
Additionally, refinancing can reset the clock on your mortgage, meaning that you may end up paying more interest over the life of the loan, even if your monthly payments are lower. This is because the interest on a mortgage is front-loaded, meaning that you pay more interest in the early years of the loan than you do in the later years.
Home equity line of credit
A HELOC works similar to a credit card in that you can borrow up to a certain limit and repay the balance over time. “Something to consider,” says the Paso Robles mortgage lender, “is that the interest rate on a HELOC is typically variable and can change over time, based on market conditions.”
Some of the advantages of a HELOC include:
- You can borrow and repay as needed, up to your credit limit. This means that you have the flexibility to use a HELOC to finance ongoing expenses, such as home renovations or education costs, without having to take out a new loan each time.
- A HELOC typically has lower upfront costs than refinancing. While there may be some fees involved in setting up a HELOC, such as an appraisal fee or an origination fee, these are generally lower than the closing costs associated with refinancing.
However, a HELOC also comes with some potential drawbacks. Because the interest rate is variable, your monthly payments can fluctuate over time, making it harder to budget and plan for expenses. Additionally, if you use a HELOC to consolidate debt or finance expenses that you couldn’t otherwise afford, you may end up increasing your overall debt load and putting your home at risk if you can’t make the payments.
Work with the expert
So, which is better, refinancing or getting a line of credit on your home? The answer depends on your individual circumstances and financial goals. Working with Marc Coons can help you identify the best options for either refinancing or a HELOC. With access to hundreds of lenders who are flexible and interested in working with homeowners, Marc and his team of professional loan consultants are ready to:
- Answer your questions.
- Streamline the process with an easy one-time application, monitor the responses from lenders and keep you informed.
- Troubleshoot any issues that might come up.
Backed by CrossCountry Mortgage, the team works to get you:
- Exact amount you want or need.
- Best interest rate.
- Best terms.
Reach out to Marc today and get started!