Thinking about tapping into your equity? Which way is best?

Looking to tap into your home’s equity? There are several options, and a few things to consider, when deciding which right for you.

If the interest rate on your mortgage is higher than current rates, it may make sense to refinance and take a lump sum of cash from your home’s equity. You'll simply refinance your mortgage to a larger loan amount and take the difference in cash.

Another option is a home equity loan. A home equity loan is essentially a second loan that you take out in addition to your first mortgage. Commonly referred to as a "second mortgage," a home equity loan allows you to tap into your home equity to get cash without refinancing your first mortgage. A home equity loan is a good choice if you'd like your cash in a lump sum and you already have a great rate on your first mortgage.

A home equity line of credit (HELOC), your third option, is very similar to a credit card except that it uses the equity in your home as the revolving line of credit. You make monthly payments only if and when you use the money. But, unlike credit cards, the interest is usually tax deductible.* With a HELOC, you can get a lump sum at closing, or elect to take only part of your money and draw on the rest when you need it. Unlike a home equity loan or a refinance, you can get a home equity line of credit in as little as ten days. A HELOC is a good choice if you'd like ready access to your home equity when you might need it.

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