HELOC vs. refinance: Which is better for a cash-out loan? Is a home equity line of credit (HELOC) or a refinance of your principal mortgage the better option for you?

Market Rate Can Help You Choose

A recession in 2020 could see rates fall even further than they have in the last two months. Some industry pundits are suggesting we could get back to the lowest levels last seen during 2016, after the Brexit announcement.

Be Ready With a Loan Application

In this most recent run on rates, the market has hit bottom a handful of times. And each time it seems to stay there for just a day or even a few hours before rates start increasing again.

To capture the market once rates touch a low level, it’s important to have a loan application already in process. This allows the market to be locked for the lender before it runs higher again.

This is the normal process during every refinance heavy period. We identify at what rate it would make sense to refinance. Then we get those loans set up so we can capture the rate drops when they happen.

No Application Fee, No Commitment

There is no application fee with me nor any monetary commitment. So it’s a no-cost opportunity to be in line to capture a great rate when you’re timing your loan with rate fluctuations. The majority of mortgage refinances I am closing now and during any refinance run are where the rate drops .5% or more compared to the current rate, with the lender paying all of the closing costs.

No Appraisal

With the recent property appreciation of the past few years, many of the refinance loans I am closing also don’t require an appraisal. The investor/lender underwriting system can agree with the valuation I input into the system through various automated valuation applications that then allow for no appraisal.

Rate and Term Refinance

We can also do a “rate and term” refinance. This means we are simply reducing the interest rate and not taking any cash out of the property’s equity. In that case, we have a very high probability of avoiding an appraisal.

Cash-Out Refinance

In addition to reducing the rate, many borrowers are taking advantage of the low rate environment to take cash out of their equity. It can be used to fund home improvement projects, pay off debts, and fund their portfolio including their retirement. Paying for kids’ college tuition is an event that can be financed from a cash-out refinance.

HELOC with Credit Line

If you simply want to access your equity when you need it, without an immediate need for cash, a HELOC with a