Home equity or mortgage refinance: Which should you choose?

Looking to refinance your first mortgage and take cash out at closing? Consider another option.


When the prime rate is below the average rate charged on 30-year fixed mortgages, consumers looking to tap their home equity may find it cheaper for them to get equity loans or lines of credit. Besides costing thousands of dollars less in closing costs, the rates on these loans may be lower than first mortgages. Although home equity loans and lines of credit are currently attractive, they aren't always the best option.


It can be beneficial to someone who knows they'll pay it off in a few years or who'll want to move out in a couple of years. But, if you need a longer time to pay off in order to keep payments reasonable, and can't afford a five-year or 10-year repayment schedule, a mortgage may be best.