Your Colorado home is valuable. So, why not dip into the equity you’ve accrued as a homeowner to help reach a few financial goals in your life? Two options are a home equity loan and a cash-out refinance. Both put dollars in your pocket but in very different ways. Let’s discover the best option for you!
When should I consider a home equity loan?
Home equity is the value of your home, above whatever you still owe on your mortgage. These funds can be calculated and loaned to you in good faith that your home will maintain its property value during the life of the loan.
This type of loan is a good option for those who want to borrow money at a low-interest rate (cheaper than putting expenses on a credit card), with no application fee and flexible payment options. Here at Elevations Credit Union, we offer a range of term options and work with in-house underwriters to give you the best service possible.
Consider a home equity loan when you want to tackle a home remodeling project or complete a major home repair (like installing a new heating system). The loan can also be used beyond home improvement projects, such a starting a college fund or paying off high-interest debt on a credit card.
Home equity loans work well for funding one large, one-time expense.
Is a cash-out refinance better for me?
Cash-out refinance can be a good option for debt consolidation or most commonly people use it to get a lower interest rate on their mortgage. This is when you refinance your home for more than the current amount owed on the mortgage. You can then use the difference for your financial needs.
With a cash-out refinance, the homeowner could increase the new loan by a percentage of the home’s value. Different loan programs and property/occupancy types have different caps. For example investment properties are capped at 75%, VA Loans 90% and FHA at 85%.
A cash-out refinance is a good option when you want to consolidate and pay off large credit card debt, prefer a longer-term loan with a lower interest rate and smaller monthly payments, or seek a less costly option than a personal loan.
Choosing the best loan option for you
Both types of loans will get you cash in hand to fuel other financial responsibilities but in different ways. It’s best to speak with a mortgage loan officer to understand the nuances of each loan type.
We’d be happy to break down the timeline, costs and payment plans associated with each of these loans offered by Elevations Credit Union. We understand each one of our credit union members has unique financial needs, so we will work together to determine which option best suits your specific situation.
Are you ready to speak with a loan officer? Contact us today at (800) 429-7626 with your questions. We’d love to help!