Mortgage Refinancing refers to borrowing through a new mortgage with altered terms and conditions. Every time you refinance, you change one or more factors in your mortgage deal. Either your interest rate changes from fixed to fluctuating or you may opt to alter the term of your loan eventually altering your monthly payment. Here, in Cash-Out Mortgage Refinance you simply alter the borrowed amount on the mortgage, i.e. increase it.
On the other hand, Home Equity Line Of Credit (HELOC) refers to a credit lending option you can access whenever you wish to. It is more or less like a credit card with a fixed collateral being your home equity.
Why and When Should You Choose Cash Out Mortgage Refinance over HELOC?
Your Credentials Matter
As the borrowing amount increases, so do your interest payments, your tenure and hence eats at your owned equity. This happens in both cases, but in HELOC, the lender simply does not know your credit requirement and will simply be lending you on the Prime Rate, while in Cash-Out Mortgage your interest rate will be based on your credit score and borrowing amount.
You Know How Much You Owe
As we are aware, the things which are easily available to us are generally less valued compared to the things which are not. Ease of credit availability in Canada has made many borrowers stock up more monthly payments than they can handle. HELOC does not give you a fixed monthly repayment plan, but in case of Cash-Out Mortgage Refinance, your repayment plan is well laid down.
Borrowing Purpose is Significant
Cash-Out Mortgage Refinance opted when the borrowing purpose is either for expansion, commercial return or a sudden emergency.
However, if you are not borrowing for a significant emergency or not borrowing a significant amount, and are planning to repay the loan quick enough, HELOC can be a better option. Safdar Raja can help you on what would be best for your situation. As borrowing for a car can be a significant loan for one but not as much for another.
Visit us to Find Out Your Cash Out Mortgage Refinance Borrowing Capacity Today