Which Home Equity Loan is Best for You?


Deciding which home equity loan is best for you depends on two things:

• Do you want to receive your money in one lump sum?

• What do you need to use the money for?

There are three ways to turn your home equity usable cash:

Note* Texas Home Equity rules apply to all properties located in the State of Texas. Basically you can not pull out more than 80% of homes value.

1. Cash-Out Refinance

When you take a "cash-out refinance," it means you're refinancing your existing loan to a larger amount than what you owe and taking the difference in cash. You receive your money in a lump sum and you might use the cash for home improvements or debt consolidation. If the mortgage interest rate on your existing home loan is higher than current rates, it may make sense to refinance this way.

2. Home Equity Loan

If you have a great mortgage interest rate and don't want to refinance your existing mortgage, a home equity loan might be the way to go. A home equity loan is a second loan that you take out in addition to your first mortgage It allows you to get cash from your home's equity.

A home equity loan takes less time than refinancing your first mortgage and is a good choice if you'd like your cash in a lump sum. Again, you might use this for home improvements or paying off high-interest credit card debt. You might also use it to pay medical bills or finance a second home.

3. Home Equity Line of Credit

A home equity line of credit (HELOC) is different from the first two options. It works similar to a checking account or credit card except that it uses the equity in your home as the revolving line of credit. You pay only if and when you use the money. But, unlike credit cards, the interest is usually tax-deductible.*

With a home equity line of credit, you have the choice of getting a lump sum at closing or only part of your money and drawing on the rest when you need it. Unlike a home equity loan or a refinance, you can get a home equity line of credit in as little as ten days.

A home equity line of credit can be a good choice if you need to access your money more than once, like when you're renovating your house and need to pay different contractors at separate times.