I want to get financing to renovate a bathroom. Whats the difference between a home equity line of credit and a cash-out refinancing?
A HELOC or Home Equity Line of Credit is typically a second mortgage on top of your existing one, secured on the portion of your house that you’ve already paid off. In some ways, a HELOC is like a credit card: your money is available to you at any time (up to your credit limit) and you only pay interest on the amount you actually use, not the full amount of your available credit. A cash-out refinancing is a mortgage that replaces your current mortgage. If the value of your house has increased since you bought it, your lender will probably let you increase the amount of principal and get some of the money out as cash. The new loan pays off the old loan and you begin repayment under the new terms.
