what is the difference between a home equity loan and refinancing with a cash out?

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  • 1 decade ago
    Favorite Answer

    Mahit Madaan is giving you part of the truth. More of the truth is that a Home Equity loan is a 2nd mortgage at a higher sometimes much higher interest rate. This will depend on your credit and credit score of course. You will end up with TWO mortgage payments, one at a lower rate and one at a higher rate. The qualifications for a 2nd mortgage are a bit more steep because with a 2nd mortgage, you become a higher risk. Many times two mortgage payments may stress your monthly finances in ways that you may not notice until after you close. Conversely, if you refinance your first mortgage, you will only have ONE mortgage payment. Obviously, the rate will be slightly higher than what you have at the moment, but you will avoid the sometimes MUCH higher interest rate on the 2nd mortgage, and instead of amortizing the 2nd mortgage for the usual 15 year period, the entire mortgage can be amortized over 30 years or 40 years, thus lowering the monthly payment. I am telling you this because I have refinanced many, many customers who wanted and needed to consolidate 1st and 2nd mortgages to lower their monthly mortgage payments. If you want to discuss this further, by all means, please contact me at wwi_2@yahoo.com

  • 1 decade ago

    The most important difference is that in Home equity loan you don't need to pay the closing cost on the whole balance. So if you have a good interest rate on your first mortgage then you should take home equity loan rather than refinancing with cashout. Although you will get a higher interest rate, but still you will save some more as compared to taking cashout with refinancing.

    For any further queries feel free to write me at refinance@inbox.com

    I can help you refinancing or home equity loan.

  • itani
    Lv 4
    4 years ago

    there is 3 numbers you may desire to understand approximately domicile fees and fairness. the 1st is the domicile valuation. the 2nd is the present stability of all mortgages on the domicile. The 0.33 is the owner's fairness (how various of the domicile does the owner easily very own). a house fairness very own loan is a private loan using the owner's fairness as collateral. while approving domicile fairness loans, some banks will use a much better valuation volume, however the interest fee could be a splash greater. Refinancing is the place the unique very own loan is paid off using a clean very own loan. in specific situations, the hot very own loan is for a much better volume, giving the owner earnings substitute for a number of their fairness. A very own loan is repaid over an prolonged volume of time (15-30+ years). a house fairness very own loan is frequently repaid over 5 years or so.

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