Using the equity in your home can have advantages, but the best option for you will depend on your financial situation and future plans. The chart below shows the different options available and the benefits for each.

Second Mortgage HELOC Cash-Out Refi
Money Availability Disbursed up front Can draw against the line at any time Disbursed up front
Interest Rates Fixed Variable Fixed
Terms Fixed Evergreen Fixed
Payments Fixed Only pay on the amount that is drawn Fixed
Closing Costs No No Yes
Best Option For Need for full amount up front to pay for educational expenses, medical fees, other lump-sum expenses, or debt consolidation. The interest rates for second mortgages are usually much lower than for credit cards. Need access to cash periodically over a span of time. These expenses are usually incurred on an ongoing basis. A HELOC can be used for a series of home improvements, for example, or launching a small business. Need for cash right away, your home has gone up in value, and you also qualify to get a better interest rate than on your first mortgage. You could use the cash-out amount to pay off other debts, such as car loans or credit cards.

Remember, home equity debt is not a good way to fund recreational expenses or routine monthly bills. However, it can be a real lifesaver for anyone saddled with unexpected financial challenges. Home equity debt can also be a good way to invest in the future. The key is to make sure that you are borrowing at the lowest possible interest rate.
Our mortgage experts are ready to answer any questions you may have and get you started with the best option for you and your financial situation and goals. Give us a call at 801-399-9728.