CHARLESTON, SC — Homeowners trying to tap equity have two main choices: a home equity line of credit, or HELOC, and a cash-out refinance. Chris Blough, known as the SC Lender Lady, said both can provide access to cash, but they work differently and can lead to different long-term costs for the borrower.
Blough works for Ascend Financial Group, a locally owned company that Charleston Living Magazine recently named best mortgage company. She said rising insurance bills, car payments and credit card rates are making it harder for many households to manage expenses, and even a small change can create a much larger financial strain.
How The Two Loans Differ
Blough described a HELOC as a revolving line of credit that lets a homeowner draw money as needed during a set period. During that draw period, the borrower usually makes interest-only payments, which can help with projects or expenses that do not happen all at once. She said that flexibility makes it useful for home repairs, business spending or short-term cash needs.
A cash-out refinance replaces the current mortgage with a new loan, usually with one monthly payment and a fixed rate. That can make the payment structure easier to follow, but it also means the borrower resets the mortgage term and may have to pay closing costs. Blough said homeowners should weigh those tradeoffs against the value of their current loan.
Why Current Rates Matter
Blough said the borrower’s existing mortgage rate is often the most important factor. A homeowner with a low rate may not want to give it up, especially if today’s refinancing options are higher. In that case, she said, a HELOC can provide access to money without disturbing a mortgage that is already favorable.
She also pointed to the reverse situation, where a homeowner’s current mortgage rate is already above what is available now. In that case, a cash-out refinance may let the borrower access equity while improving the payment structure. She said the decision should also account for how long the loan will be kept and what the money is for.
What Homeowners Should Check
Blough said some borrowers hesitate to give up mortgage rates in the 2% to 3% range even when they carry other expensive debt, such as student loans or credit cards. She said people with debt should not cling to a low mortgage rate if another option better fits their goals. She also noted that a short-term HELOC can help cover specific repairs like a roof replacement or water heater.
She said one recent client, a single mother, used refinancing to consolidate debt. Although her mortgage rate rose from 4% to 6%, Blough said the new structure lowered her monthly expenses by $1,200. Homeowners can review options by speaking with a mortgage professional or by contacting Ascend Financial Group at 843-568-6039 or online at ascendfinancialgroup.org.
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