Borrowing home equity? These 3 things can help you pick the right loan type.

If you’re planning home renovations, the potential tax deductions can make a home equity loan or HELOC more attractive.

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If you own a home, Equity that you have built up over time. Borrowing at competitive rates can be a valuable resource – especially compared to other borrowing options today.

But there are a few different ways to borrow against your home equity, each with their own benefits and costs. Oh Cash Out RefinanceFor example, it gives you the option to replace your existing one and take out a new mortgage for a higher amount. But oh Home equity loan or Home Equity Line of Credit (HELOC) There is a separate lending option that you will use in addition to your mortgage.

If you’re looking to borrow money against the equity in your home, it can help to know the ins and outs of these products, so you can make sure you’re making the right choice for your financial situation and goals. are

Compare today’s top refinance rates. To find the best option for you.

3 Things That Can Help You Choose the Best Home Equity Option

Here are three factors to consider before deciding between a cash-out refinance, home equity loan or HELOC.

Your current mortgage rate

Whether or not you’re happy with your current mortgage rate is one way to decide which product to choose.

Oh Cash Out Refinance The only option is to take out a loan that will replace your current mortgage loan. If your mortgage rate is too high and you have the credit to qualify for a better rate today, refinancing may be the best option. Although a cash-out refinance will increase the total amount you owe, you can save money with lower interest over the life of the loan.

On the other hand, if you have a low mortgage interest rate — maybe you locked in a historically low rate during the pandemic, for example — you risk increasing the interest you owe. Don’t want to take the money. Instead, consider taking out a separate loan from your mortgage in the form of one. Home equity loan or HELOC. Fortunately, both carry a lot Competitive interest rates Compared to other borrowing options today, such as personal loans or credit cards.

Check out today’s top home equity rates right here.

How do you want to access the money?

How much money you want to borrow—and how you want to access it—is another factor to consider.

Both home equity loans and cash-out refinancing will result in a lump sum that you can put toward your financial goals — whether you want to complete one. Home renovation project Or pay current High interest loans. This can be good if you have a specific goal in mind and know how much money you will need to achieve it.

With HELOCs, on the other hand, you are approved for a line of credit that you can borrow as you need for a specific period of time. Contrary to a Second mortgage or cash-out refinance, you’ll only pay interest on the amount you actually use, not the entire credit line you’re approved for. This may be a better choice for you if you want to complete multiple projects over time or use your home equity as a safety net.

What will you use the money for?

Along the same lines, what you’re using the money for can also help you decide between borrowing options.

With a cash-out refinance, you can use the money you borrow for basically anything. However, it’s generally a good idea to use it to boost your equity to add more value to your home, or as a way to consolidate and pay off loans that have high interest rates.

But home equity loans and HELOCs have added incentives if you use them for home renovations or repairs. The IRS allows you to. Reduce the interest you pay. From your taxes toward these loans if the money is used for eligible renovation expenses.

While home equity loans or HELOCs can also be useful for paying off high-interest loans and other financial obligations, there’s a clear incentive to put the debt you borrow back into the value of your home.

The bottom line

If you’re a homeowner looking to borrow money today, looking to your home equity can be a solid option—and likely help you save as interest rates rise. Before you decide whether a cash-out refinance, home equity loan or HELOC is right for you, make sure you understand the benefits and drawbacks of each. The rate you’re currently paying on your mortgage, the options you have for accessing your money and what you actually plan to use it for will all determine the right loan for you. can help you decide on an option.

Also remember: One characteristic that cash-out refinancing, home equity loans, and HELOCs all share is that they are secure forms of borrowing that are secured by your home. Regardless of the type you choose, you should plan to budget for your monthly payments and pay your balance in full and on time each month. Otherwise, you may risk losing your home.

Start comparing the best home equity rates available today..

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