Whats the difference between a refinance and a home equity loan?
Many homeowners incorrectly believe that a refinance and a home equity loan are the same thing. They are not. With a refinance, the old first mortgage is paid off and any cash out to consolidate bills or given to you at close is rolled together into one new loan. One rate. One loan. One payment. A home equity loan is synonymous with a second mortgage. If you take out a home equity loan (fixed amount or line of credit) you will have a second loan and a second mortgage payment with a usually much higher second mortgage rate. For most homeowners, refinancing is the single best way to get cash and consolidate high rate debt.
– Many borrowers believe that a mortgage refinance and a home equity loan (HELOC) are the same thing. They are not, however you can refinance a home equity loan. With a refinance, the old first mortgage is paid off and any cash out to consolidate bills or given to you at close is rolled together into one new loan. The rate, loan, and payment become one. A home equity loan is pretty much synonymous with a second mortgage. If you take out a home equity loan (fixed amount or line of credit) you will most likely have a second loan and a second mortgage payment. Second mortgages usually have a much higher interest rate. For most homeowners, refinancing is the single best way to get cash and consolidate high interest debt. Remember, this is because first mortgages have lower interest rates than 2nd mortgages.
