When to Refinance with a Home Equity Loan
One use of a home equity loan that is less commonly thought of is refinancing. You can refinance a first mortgage, home equity loan (HEL), or home equity line of credit (HELOC) with a new home equity loan. When home equity loan rates are comparable to mortgage rates, or when home equity loan rates have decreased since you closed your current HEL or HELOC, it might make sense for you to consider refinancing using your existing equity. In addition, some lenders, like Discover Home Loans, do not charge origination fees or cash at closing, unlike traditional or cash-out refinancing.
Benefits of Refinancing with a Home Equity Loan
If you’re looking to refinance your mortgage for a lower rate, different loan terms or to get cash out of your home to use for any expenses, a home equity loan refinance may be for you. As mentioned, some HELs don’t require cash at closing, which can represent significant savings, and you can put more towards the principal amount. In addition, home equity loans don’t require mortgage insurance and may be up to 100% tax deductible under certain circumstances. Consult a tax advisor to learn more.
The best time to refinance your mortgage using a home equity loan is when you: