Home equity loan vs. refinance
Home equity loans and mortgage refinances can be useful financial tools—which option is best depends on your goals and circumstances. For example, home equity loans can be a less expensive option for consumers who need access to cash, while refinancing is a great way to lower your monthly payments or save money on interest.
Refinance vs. home equity: which is right for you?
There are a number of things to think about before deciding whether to refinance or borrow against the equity in your home.
- Determine your primary goal: Are you looking to lower your monthly mortgage payment by securing a more favorable interest rate or get cash to finance a new project, or both? Refinancing might be the best choice if your primary goal is to lower your monthly payment or pay off your mortgage faster. If you want cash for improvements, education expenses or to purchase something you’ve been dreaming of, then consider a home equity installment loan or our Smart Refinance. Another option might be a home equity line of credit (HELOC).
- Shop rates and compare closing costs: Home equity loan rates are typically higher than mortgage rates, but often have lower closing costs than a refinance loan.
- Consider how long you plan to live in your home: If you don't plan to stay in your home for the long haul, a home equity loan may be preferable, as you may not recoup the closing costs on a refinance loan.
Refinancing can be a great way to get new mortgage rates and terms, as well as a one-time source of cash. If your current mortgage is satisfactory, home equity loans can be a less expensive option for consumers who need access to cash, while refinancing may be a way to lower monthly payments or save money on interest.