Answers
Refinance & Home Equity: Your Questions
When to refinance, how to tap equity, and how to protect a low rate.
The questions homeowners ask about refinancing and pulling equity — with the one rule that matters most running through all of them: protect a low first-mortgage rate.
Common questions
When does it make sense to refinance?
When the monthly savings clear the closing costs within the time you will keep the loan — the break-even test — or when you are shortening the term, leaving an adjustable rate, or removing mortgage insurance. Chasing a slightly lower rate you will not hold long enough rarely pays.
I have a low rate but need cash. What should I do?
Do not refinance your whole mortgage and reset that low rate. Use a second lien — a HELOC or home equity loan — or a home equity investment, which leave your first mortgage untouched and only price the new money. The blended cost is usually far lower.
How much equity can I access?
Lenders keep a cushion of equity in the home rather than letting you pull all of it, and the exact maximum varies by program and property type. We will give you the specific number for your situation up front.
What is the difference between a HELOC and a home equity loan?
A HELOC is a revolving line you draw from as needed, usually at a variable rate; a home equity loan is a fixed lump sum with a set payment. Both are second liens that keep your first mortgage in place — the choice is about how you borrow.
Can I refinance to get rid of FHA mortgage insurance?
Yes — refinancing an FHA loan into a conventional loan once you have enough equity and credit is the common way to shed FHA’s lasting mortgage insurance. For many borrowers that refinance is the plan from the day they take the FHA loan.
Is a cash-out refinance a good way to pay off debt?
It can be, but only if your current rate is already at market. If you hold a low first-mortgage rate, a second lien or a home equity investment usually pays off high-rate debt far more cheaply, because it does not reprice your whole balance.