What’s the difference between refinance and home equity loan?

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Trying to understand the difference between refinancing and a home equity loan? If you are looking for cash for emergencies or house repairs or whatever reason you may have to need cash, you can consider a cash-out refinance or home equity loan.

Both cash-out refinance and home equity loans can be the solution to the problems you are facing now but there are differences between both loan programs.

What is cash-out refinancing?
Cash-out refinancing is the program you use if you want to pay your old mortgage off and exchange it with a new mortgage. You do this because the new mortgage is offering you a lower interest rate and a better loan package.
What is a home equity loan?
A home equity loan is the kind of loan that lets you get cash based on how much equity you have built property. This is another loan that you are going to repay with different terms.
If you need a big amount of money for a need like improving your home or major renovations, then a cash-out refinancing may be good for you as it will help you save money by lowering interest rates. But if you need to have a cash reserve for something that you are preparing for soon then a home equity loan may be better for you.
The bottom line is that you apply for a cash-out refinancing if it can lower the interest of your APR or annual percentage rate. Will your refinance application give you a shorter loan term and lower your monthly payment as well? If you answer yes to those, then cash-out refinancing may be a good option.
When do you apply for home equity loans? When it offers to lower your fixed interest compared to your earlier mortgage. It is best to use the money you can get from your equity loan when you renovate your home and raise its value.  But be wary though because if you use your home as security for your loan, you stand to lose it if you fall behind your repayments as you are using this as collateral. If you don’t have a good credit rating or are too deep in debt, then home equity loans might not be for you.
Let us know how we can further help you in your quest to know the difference between refinance and home equity loan.
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CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE BANKER OR A LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.

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