When looking to take a loan out a one’s home, look at all options available. Refinancing is a way to lower a monthly mortgage payment and save over time by paying a lower interest rate. A Home Equity Line of Credit is slightly different, but is still considered a loan. When a person owns of home, they may borrow on the equity to pay for anything they want to spend the money on. Most people save this for emergencies. Unlike a traditional loan, a HELOC is a line of credit. This means that the amount a person qualifies for might be over what a person actually borrows. There are many advantages to either of these loans.

Refinancing your Loans. By refinancing, a person can save money over time. Depending on how much they owe on their home, they can have extra money to use for college, repairs, and other expenses. They will still make monthly mortgage payments, but the payments will be smaller because the amount of time on the loan has been lengthened. This is a disadvantage to refinancing. If people are considering moving within five years after refinancing, then this loan may not be the best choice for them. Also, refinancing should only be considered if a person can get an interest rate 2% or lower than their current rate. Since the market fluctuates often a person could be taking a gamble. One week the interest is lower and after a person applies for a loan, it could go back up.

Choosing a Home Equity Line of Credit. A HELOC loan should be considered when a person wants a line of credit that they can access for emergencies or home repairs. This loan is paid back monthly in addition to a mortgage payment. People who are careful with their money and know how to use it should consider a HELOC loan. These loans are oftentimes tax deductible and can be taken out for more than what a person owes on their home. The only drawback is when a person goes to sell their home; they will need to sell it for at least the amount of money taken from the HELOC account.