Equity Home Loans

are equity loans better than getting a mortgage? if i could get a loan for the same amount bewtween a?

mortgage and equity loan, does one have a better interest rate than the other overall? does an equity loan have an advantage or is it almost the same thing if i just got another mortgage?

Public Comments

1. Some don't want to refinance there low fixed rate, so they just get a equity loan. A line of credit is like an open credit card, you only pay back what you use.
2. What you pay in interest is based on the risk involved in the loan. The standard is a purchase money mortgage - you're using the loan to buy a home. If you are refinancing a loan without increasing the principle and lowering the monthly payments, your risk decreases so your interest rate decreases. If you are refinancing and taking money out of the house, which would include an equity loan, your interest rate increases. While an Home Equity Line of Credit, or HELOC, will carry a higher interest rate - not only is it taking equity from the home, but it has second lien position - you will avoid carrying a higher interest rate on the remaining principle of your home, so it may be the better choice for you. Have a lender or broker run the numbers both as a cash-out refinance and an equity line and see which gives you the lowest overall payment.
3. A mortgage will likely be at a lower rate, but will have closing costs and will take longer and require more steps to approve. Most lenders offer equity loans with little or no fees, and the underwriting is much quicker. However, if your credit history is poor, you will have better chances getting a mortgage refinance approved. The best advice is to use a local broker who can advise you on the best solution in your situation, then shop for the best rate/lowest fees using a single inquiry on your credit.