Home Equity: How to Use It

Real Estate

Home Equity: How to Use It

A refinance pays off your current mortgage and gives you cash based on your equity. These are good for:

l Lowering or locking in your mortgage interest rate

l Getting large sums of money ($30,000 or more)

If you're looking for a large sum of money to be paid off over the long term this is the better option. You'll benefit from the low-interest rates on a new mortgage. You have the choice of extending out to a new 30-year mortgage which may even lower your monthly payment or if you'd rather work towards paying off your mortgage sooner there are 20 and 15-year terms. The shorter terms usually have an even lower interest rate. I recommend consulting with a mortgage advisor and/or your trust financial advisor.

Home equity loans (second mortgage) are installment loans that are paid out in one lump sum. They’re good for:

l repaying credit card debt

l remodeling projects

A home equity line of credit works like a credit card – you agree to a pre-set limit and then borrow as you need to, or in the event of an emergency, usually for up to 10 years. Good for:

l debt consolidation

l major home improvements

Using as a down payment on a second home or investment property.