Home Equity Loans

There are three ways to turn your home equity into usable cash:

1. Cash-Out Mortgage Refinance

When you take a "cash-out mortgage refinance," it means you're refinancing your existing loan to a larger amount than what you owe and taking the difference in the form of cash. You receive your funds in a lump sum cash out at closing and you are able to use the cash for home improvements, debt consolidation or however you choose. If the interest rate on your existing home loan is higher than current rates, it may make sense to do a mortgage refinance.

2. Home Equity Loan

If you currently have a great interest rate on your mortgage and don't want to do a new mortgage refinance, an actual home equity loan might be just what you need. The basic home equity loan (also called a second mortgage) is a second loan that you take out in addition to your first mortgage. The simple home equity loan allows you to pull cash out from your home's equity.

The advantage of asecond mortgage or home equity loan is that it takes less time than mortgage refinancing does and is a good choice if you'd like a lump sum cash out. As mentioned before, you might use this for home improvements or paying off high interest credit card debt. You might also use it to pay off medical bills, finance a second home, take an exotic vacation or virtually anything you want to spend it on.

3. Home Equity Line of Credit

The home equity line of credit (HELOC) is different from the "cash-out mortgage refinance" or the "Home Equity Loan", previously mentioned. You might say it works similar to a checking account or credit card except that it uses the equity in your home as a revolving line of credit. Like a credit card, you only pay if and when you use the money. But, unlike the credit card, the interest is generally tax-deductible.*

With a home equity line of credit, you have the choice of getting a lump sum of cash out upon closing or only some of your money and drawing the rest out as needed. Unlike a home equity loan or a mortgage refinance, you can get a home equity line of credit in as little as ten days.

The home equity line of credit can be a good choice if you need to access your money more than once, like when you're renovating your house and need to pay different contractors at separate times. It is also ideal if you have the ability to pay the money back quickly after you have drawn it out, like when you are using the funds for short term financing of business transactions.