Cash Out Refi Vs. Heloc: LoanLove.com Explains The Pros and Cons Of Each In A New Guide

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A new article from Loan Love explains the difference between cash out refinances and home equity loans.

LoanLove.com is a borrower advice website that provides detailed insights into the mortgage industry in a fun and entertaining way. The team at LoanLove.com is devoted to help empower both first time and experienced homeowners with valuable resources, first-class knowledge and connections to top-rated industry professionals and has the mission of helping consumers and borrowers to obtain the latest information on mortgage lending trends, the real estate market and the U.S. financial landscape in order to help them obtain a home loan that they will love. To help loan borrowers get the latest scoop on mortgage loan news, the loan advice website is constantly providing readers with guide videos and articles when it comes to their mortgage inquiries. Their newest featured article continues to provide the most up to date and relevant information by presenting both sides of the cash out refi vs. heloc debate.

The article starts off by explaining: “First thing to know: While both a refinance loan and a home equity loan will let you access your home’s equity, they differ in the way they “attach” themselves to your property. A refi loan is simply a brand-new mortgage that replaces your old mortgage, while a home equity loan is a loan in addition to your existing mortgage. That means that with a home equity loan, you’ll still be paying your regular mortgage and you’ll also need to pay the monthly payment for your home equity loan.”

The Loan Love article explains that the biggest pro favoring a home equity line of credit (heloc) and the biggest “con” of refinance loans come down to the same thing – closing costs. Loan Love says: “Home equity loans have no closing costs, and that can mean a savings of hundreds – even thousands – of dollars compared to a cash-out refinance loan, which typically comes with all the same closing costs as a purchase mortgage.”

However, there are some things that need to be taken into consideration before opting for either of these types of loans. First of all, the home loan borrower should consider whether they are capable of handling the financial burden of an additional home equity loan on top of their current mortgage payments. If they can not afford to do this, than a heloc is not the right choice.

However, unless the homeowner really needs the money, a refinance loan will not make sense if it means that they will pay a higher interest rate than they currently have with their mortgage. The article also says: “…if you don’t have plans to stay in your home for several years, paying all those closing costs that are associated with a refi loan may not make sense either. And if you’ve been paying on your home for a long time – say, 20 years of a 30-year mortgage – it may not make sense to refinance either, since you’d be at the point where your payments are being applied mostly to the principal (in plain English, you’d be building equity more quickly).”

But, what it really comes down to in the end is that the borrower needs to really crunch the numbers, take advantage of loan calculators and really take the time to shop around to ensure that they are able to benefit from the most savings. For more information, please visit LoanLove.com for the full cash out refi vs. heloc guide.

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Kevin Blue
Loan Love
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