Home Equity Basics

If you're thinking about borrowing money using your home as collateral, you should consider your options.

Which lending option is right for you depends on a number of factors, such as:

how much equity you have

how long you plan to stay in your home

how much money you want to take out.

Before you decide, you should understand the basics.

Know the key differences

When you refinance, you are replacing your current mortgage with a new loan to lower your monthly payments, get cash out to make a purchase, pay off debt or achieve other financial goals. With this option, you will have one monthly payment.

You may find your current first mortgage rate is better than the refinance rate available and you want to keep what you have. Now may be the time to look at a 2nd mortgage, also known as a home equity loan or line of credit.

Home equity loan and Home equity line of credit are two different kinds of loans that are different from your first mortgage and require a separate monthly payment. You borrow against the equity built up as a result of paying your mortgage, so the more you've paid down, the more you can borrow.

The Pros and Cons

There are pros and cons associated with each option. Typically, with a traditional refinance , you'll have:

Lower interest rates, but higher closing costs

Lower payments

Longer minimum loan terms

More fixed-rate options

With a our Refinance, you'll have:

Lower costs than a traditional refinance

Competitive fixed rates

Flexible repayment terms available

And with a home equity loan or line of credit, you can expect:

Lower closing costs, but higher interest rates

The ability to borrow up to 89.9% of your home's market value.