Can Foreigners Buy Property in the US? It’s legal, and it may be easier than…
What’s the best way to pay for your home renovation?
What’s the best way to pay for your home renovation?
By Mia Taylor
Benefits of a HELOC
There are several upsides when using a HELOC to access money rather than a cash-out refinance, said Matt Hackett, operations manager for Equity Now, a mortgage lender. They have relatively low closing costs and give you the ability to withdraw and pay back money over the draw period.
Another significant point to understand: A HELOC does not replace your existing mortgage.
The drawbacks of a HELOC
Because the interest on a HELOC is variable, the rate can change from month to month, a fact that can be unsettling for borrowers.
HELOCs also typically have a shorter repayment timeline once the draw period ends compared to a cash-out refinance, said Hackett. Typically, HELOCs must be paid back in 20 years, instead of the 30 years commonly associated with mortgages.
“This leads to a higher monthly payment,” said Hackett of the HELOC.
Cash-out refinance
A cash-out refinance is a new mortgage. You’re paying off an existing mortgage with a new one that has different terms, such as a more competitive interest rate.
In addition, a cash-out refinance can be obtained with a fixed interest rate, which may be more comforting for some borrowers, said Hackett.
https://www.policygenius.com/blog/heloc-vs-cash-out-refinance/