Should I Refinance or Get a HELOC For Home Improvements?

For homeowners who are interested in making certain property improvements without dipping into their savings/investment accounts, you can either opt for a (HELOC) – Home Equity Line of Credit or a refinance.

Things to Consider

When you are deciding which option to choose, you should know what the differences are:

  • Timeline- This is one of the primary factors that has to be taken into account. Even before you look at the interest rates, you will have to consider the timeline or the actual duration that you will be keeping the home. This will decide exactly how many months or years you will need to pay-back the money you have borrowed.

    Are you planning on some home improvements in order to get top dollar on the sale of the house or are you looking to add some extensions to make your home more comfortable and spacious? This is an important question you have to ask yourself as the 2 types of loans will provide you the same result – they will give you the funds you need, but they serve very different purposes.

A HELOC is ideal for short-term goals & has adjustable rates that might change on a monthly basis and you might end up paying a very high interest in one month and a much lower one in another.

  • Costs / Fees- You will also have to know what the closing costs for each loan will be. This is also related to the timeline considerations. A HELOC will generally cost much less than a full refinance.

  • Interest Rate- This is one of the first things that borrowers will look at. Everyone looks for the lowest interest rate possible. But when it comes to home improvements, the interest rate is not always as important as understanding what the risk level of that particular loan is. If you need a loan for the short term- a HELOC will be more suitable even if the interest rate is higher.

Your choice between a HELOC and a full refinance depends of the level of risk you are willing to take over the time frame that you require the money. For more information and to understand whether a HELOC or a full refinance will be suitable for you, contact ResMac Home Loans.