Home equity line of credit /Refinancing

[robbieT]

What is the name of your state?Massachusetts
We recently (8 months) bought a house and have done extensive upgrading of this house.Our mortgage company is offering us a home equity line of credit.

I am thinking of refinancing instead of taking the line of credit,as we are paying 6.5 % on our mortgage.

What is the advantages and disadvantages of both options?

 

[HomeGuru]

What is the name of your state?Massachusetts
We recently (8 months) bought a house and have done extensive upgrading of this house.Our mortgage company is offering us a home equity line of credit.

I am thinking of refinancing instead of taking the line of credit,as we are paying 6.5 % on our mortgage.

What is the advantages and disadvantages of both options?

**A: consult with a mortgage broker. There are numerous factors invovled that not only have to do with interest rates, points etc. but what your personal goals are.

 

[ibcnet]

Home Equity Loan Vs Refinancing

Cash Out Plans - Refi vs Equity
When you decide whether to do the cash-out refinancing option, keep in mind that:
1. You have to pay closing costs when you refinance your loan;
2. You don't have to pay closing costs for a home equity loan.
3. Closing costs can amount to hundreds, even thousands of dollars.

If your current mortgage is at a lower interest rate than you could get now by refinancing, it's probably better to get a home equity loan.

Private Mortgage Insurance
You'll have to pay private mortgage insurance if you end up borrowing more than 80 percent of your home's value. It might be cheaper to take out a home equity loan.

Paying off high-interest credit card debt with refi.
Paying a lower interest rate and taking a tax deduction is smart but lengthening the time it would take to pay off the credit card debt may not be. Why take 30 years to pay off credit card debt that could be wiped out in five or 10 years using a shorter-term home equity loan.

For more pros and cons regarding home equity loans and refinancing see the article at
http://www.bcpl.net/~ibcnet/equity.html

 

[kingston]

For your specific case

For reasons previously stated I would suggest that the best option would be to take out the home equity loan. Avoid closing costs and since you already have a 6.5% interest rate which is fairly decent and Im not sure if that is an adjustable rate mortgage or fixed but you can just as easily and quicker pay of your debt with the equity loan.
If you decide to refinance you may want to see how that will change the term of your loan repayment schedule. That is not to say that you couldn't make additonal payments to pay down the principal balance to offset some of the costs including interest.

 

[MortgageGuru]

First things first. Without going way in depth on Underwriting Guidelines, just do this. Do a rate and term refinance on your current mortgage. Then wait 4 months and do Either a HELOC or Fixed Rate Second mortgage. You will be able to get both, more money and a lower interest rate at the 12 month mark because your Combined Loan to Value (CLTV) can be lower because you will be able to use the full appraised value of your home for the cash out purpose. Doing a rate and term refinance can use the full appraised value at any time. Once the improvements are complete have the appraisal done.