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Refinance or Home Equity Loan?

I owe $60,000 on my home that is worth around $140,000 (Zillo says $156,000) and I would like to get $15,000 cash out - do I refinance or get a home equity loan? My address:
21674 Sitting Bull Road, Apple Valley, CA 92308
  • February 07 2009 - Apple Valley
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Answers (3)

Pros to standard cash out refi:
    Lowest payment
    Lowest interest
    Fixed, payment stays the same
Cons
    Longer loan term (typically 30 years)
    Closing Costs

Pros with getting HEL
    Usually none or very little closing cost
    Shorter term (5-15yrs)
    Less interest over the long run paid since the term is shorter
 Cons
    Harder to qualify for
    Higher payment (since the term is shorter)
    Could be adjustable and/or revolving (you want fixed rates)

If you can afford it, qualify for it, and get a fixed rate...I would try for the Home Equity Line first. If not, doing a regular Cash out refinance is fine too.
However, if you have bad terms on your current mortgage, you may just want to do a standard cash out refinance.

Really need some more info from you:
    Terms of current mortgage
    Payment goals (are looking for the absolute lowest payment)
    Is whatever you're doing with the 15k worth the closing cost?
  • February 07 2009
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Joseph,

Based on the loan sizes that you desire you would be best served by going directly to a bank or credit union, whether it be a refinance or home equity loan. To answer your question specifically, the biggest question for you will be the time frame that you wish to carry your newly revised debt.

Speak with a local Certified Mortgage Planning Specialist (CMPS) to best understand the proper approach to strategic equity so that you do not have face this decision down the road.
  • February 07 2009
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Joe, that is a very low loan amount. My advice even though I don't have enough information to base a sound judgement upon would be to keep what you have.

You've probably had the loan for some time. If you got a Cash Ot refi you would start all over with your amorization. As you know, hardly any of your monthly payment goes toward reducing your balance in the first few years.

I suggest you go to your bank or any local bank in Apple Valley to apply for a HELOC. If you qualify, the Prime Index Rate is currently at 3.25% + whatever Margin the bank requires. Total should be under 5%. That's pretty cheap money, isn't it? Also, on a HELOC there are hardly any fees involved.

Have a friend that lives right by the lake up there. Beautiful! ... Best wishes.
  • February 07 2009
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