HELOC cash-out Reference

[Harley Cedoit]

HELOC vs cash-out Reference

[Trevor Alexander]

A HELOC (Home Equity Line of Credit) is a second mortgage behind the 1st primary mortgage. They work like a credit card using your house as collateral. You can take out funds as you wish based off the line of credit amount. They typically have a "draw" period of 10 years, and then it moves into a repayment period for the remaining 20 years. The first 10 years are interest/only payments from what you use. For example: you take out a credit line of $100,000 but use only $50,000 of it. You only pay interest on the $50,000, and then principal/interest after 10 years. HELOC's have a variable interest rate.

A refinance is where your current mortgage is replaced with a new mortgage. You can do a rate/term refinance where you aren't taking any money out; or, you can do a cash-out refinance where you receive cash at closing based off the amount of equity you have. A refinance will be a fixed rate or an ARM (adjustable rate mortgage).

Most lenders cap your LTV on both options at 80%.

Hope this helps.