For many people, their home is their biggest investment
and source of savings. When they need to borrow money for major
expenses, or to pay off accumulated debts, they can use their home
value to borrow money.
Pay off your credit cards
If you
have credit card or other consumer loans, it is often less expensive
to consolidate these expensive loans with your
mortgage.
Credit card interest rates are usually much higher
than mortgage interest rates. And, the interest on your mortgage is
tax deductible, while the interest on your credit card is
not.
If you have enough home equity, you may be able to pay
off your pricey credit card debts and save money.
Refinance
vs. home equity loan
Generally, there are two ways to use your
home equity to borrow money. You can either refinance with a new
mortgage that is larger than your remaining balance (a cash-out
refinance) or get a home equity loan.
A cash-out refinance is
generally cheaper, but a home equity loan will usually let you
borrow more.
