This dilemma is very common among homeowners. Most people do not like the idea of going back to a 30 year term when they refinance, which is a valid concern. Each option you will have access to will have it’s own strengths and weaknesses, and it’s important to get sound advice from your loan officer on which may be most appropriate for your goals and needs. The biggest strength to refinancing your existing mortgage, is securing a fixed rate mortgage. You will likely sacrifice in the short term to do this, but it provides protection as you continue to build equity and pay down your mortgage. Most home equity loan programs are based off of prime interest rate, which fluctuates. While this may be a much cheaper solution for the short term, it could potentially lead to an increase in rate and payment in the future.
For someone who is looking for short term debt, a home equity line may be the appropriate tool to achieve that. For someone with a longer horizon, it may make more sense to go with a more conservative approach to your mortgage refinance.
The bottom line is if you are looking to refinance, make sure you examine all options with your loan officer so you can ensure you make the right financial decision to protect your home.
Check out Bankrate’s article on other tips to consider!
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