Mortgage VS Home Equity

| November 5, 2011

Checking Into Mortgage Vs Home Equity

Maybe you need a new driveway. Perhaps the roof is leaking. Your son or daughter may be getting ready to graduate. You could some extra money. You can borrow the money on your property. You have two options for this. Here is information on mortgage vs home equity.

A new mortgage

This is known as refinancing your current home loan. Here is how this works. You apply for a new loan. If you are approved, you will receive cash that pays off your current loan. Money that is leftover, is yours to keep. You do not have to use the money for a specific purpose. It can be for anything that you wish to use it for.

Home equity loans

The loans are somewhat different. You are not taking out a new property loan. Your current loan remains intact. So does the house payment. You borrow on the value of your home, minus your current loan amount. When you receive the money, it is yours to do with as you please. You will have two separate house payments each month.

Advantages of refinancing your current loan

If you refinance, you may be able to get a lower interest rate than your current loan. You may also be able to get a shorter loan. For example, you may be paying on a 30 year loan. You might decide to refinance with a fifteen year loan. This will pay your loan off much quicker. It will save you a great deal of money also. However, it will have a much higher payment.

In some cases, you may able to take get money and not raise your house payment. This will depend on your interest rate and the loan terms. This is a very good way to borrow money without raising your monthly expenses.

When you refinance, you only have one monthly house payment. It will not be difficult to make one payment. If you take out any other type of loan, you could find yourself with much higher monthly expenses.

Advantages of home equity loans

These loans are designed to let you borrow money on your home. It still uses your home as security. You might be able to get one of these loans for as little as 48 months. This means that you will have it paid off quickly. If you need more money in the future, it will be available to you.

Disadvantages of refinancing

You might have to pay for a long time for a refinance. It may be for 30 years. This means that you will pay a lot of money in interest. It also ties up your home collateral for a long time. You cannot borrow on your home again, in the future.

Disadvantages of home equity loans

You will have an extra house payment. Many people cannot afford an additional payment. Interest rates will be higher with these types of loans. However, you may offset that with shorter terms.


Are you looking at mortgage vs home equity options? If you refinance, you take out an entire new loan. You will have cheaper house payments. An equity loan will give you two house payments, but you may get much shorter terms. Look over the options carefully. Your current budget may be the final decider.

Category: Home Loan

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