Real Estate
June 1, 2020
link to facebook link to twitter
More Stories
Second mortgage and refinance How to get a mortgage when self-employed income is tricky How the new PPP loan may adversely affect your mortgage How to navigate appraisal during coronavirus pandemic How to plan the optimal time to buy a rental property How to avoid getting a jumbo loan due to Coronavirus A factor that can drive your mortgage cost up How child support and alimony can affect your ability to get a mortgage What to look for when getting a mortgage on a manufactured home Why getting a 30-year fixed-rate mortgage is a smart financial move How to lower your cash to close when buying a home What you need to know about securing a VA mortgage Mortgage payment relates to purchase price What to expect mortgage rates to change in the upcoming months Loan limits for 2020 make getting mortgage easier Three reasons to buy home at end of year Can you get a mortgage with bad credit? Income and all outstanding loans are key factors to obtain a mortgage Your income is a lifeline to finance a home Don’t be focused on credit when getting a mortgage Why your mortgage goals may not happen Don’t make the mistake of 401(k) home buying Fannie & Freddie change home mortgage appraisals COVID-19-How a mortgage forbearence works How to get a mortgage without providing tax returns The new way to get a mortgage with 1 year income tax returns Four common home buying mistakes to avoid How to create wealth with your income and finances Should you buy a house with monthly mortgage insurance? 2019 conforming loan limits rise FHA loan limits for 2019 increase No more VA limits in Jan. 2020 Should you cash out to refinance What makes the most sense? Three pricey loan scenarios to watch A surefire way of making loan process a hassle Changing income and job status may affect mortgage chances Six common mortgage loan scenarios How to lower your debt to income when getting a mortgage How to make your financial profile less intricate Paying off debt to buy a house can be challenging Buy a home now or should I wait? Negotiating the purchase price of a house With the virus, should you be buying a home now? How to get a mortgage if you have been furloughed due to COVID-19 Three reasons you should not buy a home Types of loans based on credit score How the FHA 100-mile rules your ability to rent or buy Three quirky issues that will hurt your mortgage Seven common mortgage mistakes Why your mortgage payment keeps changing The credit score it takes to get a mortgage What to expect in today’s loan process? How 1031 tax-deferred exchanges work Six to avoid when purchasing a home How to use rental income to qualify for a mortgage Mortgage inquiry makes your credit score drop? Why waiting for mortgage rates to get better is a losing proposition Transfer property to family and be protected under Prop 13 FHA requirement might hurt buying chances Purchase price should not be most important factor Finances matter when buying a home Could the 30-year fixed mortgage get to 3 percent? Mortgage rate sounds too good to be true How the mortgage process gets ugly if you have a difficult picture Should you go FHA or conventional for purchasing your first home? Two mortgage process problems you will want to avoid Home value when refinancing What you need to know about the mortgage 4506-t document Don’t make mistakes when getting a mortgage refinance A non-traditional program for self-employed mortgage borrowers Should you buy and build or buy a single family home? How expensive your mortgage will be due to bad credit? The loan process and what not to do Should you refinance with today’s mortgage rates? Be careful getting a mortgage if you have a bankruptcy Lender knows how to purchase business? Read the fine print Cash to payment formula when buying a home A bank statement program might help get a mortgage Pulling credit may not make sense Why the VA mortgage is the best home loan Can you use roommate income to get a mortgage? Best benefit for your first-time home buyer A loan program you may be eligible for based on your credit score Be wary about paying off this type of mortgage Common questions on financed mortgaged insurance loans Things that affect your first-time buyer mortgage options Self-employed income The #1 mistake consumers make when getting a mortgage… How much are closing costs when you purchase a house? Two mortgage loan programs get a better interest rate How much of your mortgage income should be going towards an auto loan? Five quirky refinance scenarios that work Working two jobs makes now easier to get a mortgage How mortgage lender credits work

Cash-out refinance or home equity

By: Scott Sheldon
May 24, 2019

As mortgage rates continue to remain flat, it might not be a bad thing to consider really weighing out both options of getting a home equity line of credit or doing a cash-out refinance for that home improvement project or debt consolidation you have been thinking about. If you’re looking to pull money out of your house, consider your options first…

Home equity lines of credit are low cost to acquire, sometimes no cost. If you ever close out the home equity line of credit you may incur an early closure fee. A home equity line of credit is effectively an enormous credit card tied to your house. You only pay interest on any present balance which means that it can sit there with no balance as a safety cushion, if you ever need to borrow money it is at your disposal.

Any payment that you make on the home equity line of credit for the first 10 years is interest only. Meaning your balance will never go down unless you make an overage payment and the additional money that you pay beyond your interest only payment goes toward principal. These loans are also variable rate tied to the prime rate.

Mortgage tip: these loans are no longer tax-deductible.

Cash-out refinancing your first mortgage instead as an alternative to a home equity line of credit might not be such a bad thing. The closing costs might be about 1 percent of your loan amount maybe depending on your area and specific location. The interest rate is higher, but also is tax-deductible. A 30-year mortgage also means having a lower payment for your debt. If you were to compare a fixed-rate 30-year term to a home equity line of credit plus a first mortgage you might come to find that the payments for both are about the same or maybe as little as fifty bucks a month more (in some cases) for the comfort of having a long-term fixed-rate loan.

Most consumers would probably stand to benefit by being able to deduct more interest as a byproduct of cash-out refinancing their home to fix up their house or doing a debt consolidation for example then they would be taking a home equity line of credit that is not tax-deductible and has a variable payment associated with it.

Therefore, it is critical to work with an experienced lender who can walk you through the ins-and-outs of deciding whether a fixed-rate mortgage makes sense or whether home equity line of credit is a more suitable choice for you and your payment and cash flow objectives.

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at