How to Use Your Home’s Equity to Pay Off Debt
If you’re like many homeowners today, rising inflation and increasing credit card debt may have you looking for ways to make your household budget more manageable. One of the most common questions we hear is:
“How can I use the equity in my home to pay off debt?”
In our latest video, we break down two popular options for tapping into your home’s equity: HELOC (Home Equity Line of Credit) and cash-out refinance. Here’s a quick overview:
Unlocking your home's equity
What is a HELOC?
Understanding HELOC
A HELOC allows you to access your home’s equity without touching your existing mortgage. Essentially, it’s a second mortgage with its own monthly payment.
Advantages of HELOC
- Keep your current mortgage rate (great if you locked in a low rate).
- Flexibility to borrow as needed.
Disadvantages of HELOC
- Interest rates are variable, which means your payment could increase over time.
What is a Cash-Out Refinance?
Understanding Cash-Out Refinance
A cash-out refinance replaces your current mortgage with a new one for a larger amount, allowing you to access your equity in cash.
Advantages of Cash-Out Refinance
- Combines everything into one payment.
- Interest rates are fixed for the life of the loan, providing stability.
Disadvantages of Cash-Out Refinance
- Your new mortgage will reflect current interest rates, which may be higher than your existing rate.
Which Option is Right for You?
Both HELOCs and cash-out refinances have their benefits, and the best choice depends on your financial goals and current situation.
Let’s Talk!
If you’re considering using your home’s equity to pay off debt, we’d love to help you explore your options. Contact us today, and let’s find the solution that works best for you.
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Visit us at 115a South Main Street, Grain Valley, MO 64029
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