Refinance Or Home Equity Line Of Credit?

“I'M CONSIDERING several MAJOR RENOVATIONS TO MY HOME. WOULD IT MAKE MORE SENSE for me TO APPLY FOR A HOME EQUITY LINE OF CREDIT OR SHOULD I TRY TO REFINANCE MY CURRENT MORTGAGE?”

Although a lot of different factors come in to play when choosing between these two types of loans, you’re probably better off applying for a home equity line of credit (HELOC)—especially if you’re planning on making renovations that will occur in several different stages rather than all at once. The reason a HELOC is probably better for your situation is because you can borrow periodically from the line of credit and thus pay interest only on your outstanding balance. With a refinance, on the other hand, you would get a lump sum payment and start paying interest on that amount immediately. However, as mentioned above, there are many variables you’ll need to consider including interest rates on each type of loan, your credit score, the amount of equity you have, how long your renovations will take, and whether or not you’ll need to have set payments each month. Before you make any decision, talk to your mortgage professional about the pros and cons of a HELOC and a refinance. ∆