Using Your Home Equity
Refinancing Your Mortgage:
Refinancing replaces your existing mortgage with a new one and lets you tap into your home’s equity for cash—often $30,000 or more. It can be a smart way to secure a lower or fixed interest rate. Keep in mind, refinancing typically comes with various costs, such as closing costs, appraisal fees, origination and processing fees, and other charges.
Home Equity Loan (Second Mortgage):
A home equity loan is ideal if you need a moderate amount of cash and your current mortgage rate is already favorable. These loans usually have terms between 5 and 15 years and are paid out in a lump sum, making them great for larger one-time expenses like paying off credit card debt, funding home renovations, or purchasing a vehicle.
Home Equity Line of Credit (HELOC):
A HELOC works like a credit card—you’re approved for a borrowing limit and can draw funds as needed, usually over a 10-year period. HELOCs are flexible and well-suited for things like debt consolidation, home improvements, college costs, or unexpected emergencies. Be sure there's a cap on the variable interest rate. Avoid using a HELOC for unnecessary luxury spending, unless it’s a one-off expense rather than a recurring habit.