Who is this good for?
People who want money for a one-time event and prefer the
security of fixed-rate loans. This is a good option if you want to keep your
existing mortgage and prefer to receive the cash in a lump sum.
Details
This is essentially a second mortgage where the rate is usually fixed and
you repay both interest and principal each month. The payment is received as
a lump sum and you cannot draw additional money from the loan. The interest
rates are generally higher than HELOCs of the same amount because you have
the security of a fixed rate. The interest is usually tax deductible for loan
amounts up to $100,000.
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Who is this good for?
People who need access to a reserve of cash over a period
of time. For example, during a remodel you can withdraw cash periodically to
pay contractors. HELOCs provide the flexibility of having access to cash, but
not paying interest until you actually withdraw it.
Details
Equity lines of credit let you draw cash as you need it up to your credit
limit. These are adjustable loans so your monthly payments will change with
the market. Often, HELOCs allow you to pay interest only for an initial period
which can lower your monthly payments until you are ready to pay principal
also. The interest is usually tax deductible for loan amounts up to $100,000.
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Who is this good for?
If you’ve built a lot of equity and want to refinance
your entire mortgage, this is the way to go. There are many reasons to refinance,
such as taking advantage of lower rates or switching from an ARM to a fixed-rate
loan. If you plan to refinance and also want extra cash, this takes care of both.
Details
This is a refinance where you’ve build enough equity to refinance for
more than you currently owe and take the additional cash. This will increase
your monthly payments because you are borrowing more. You should compare the
rates for refinancing against those for equity loans to see which are better.
The interest on the new mortgage is usually tax deductible.
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