Homeowners often reach a point where they want to tap into their home equity. The big question is: should it be done through a HELOC or a refinance? Here’s a clear breakdown to help make sense of the differences.

What is a HELOC?

A HELOC also called Home Equity Line of Credit is like a credit card tied to your home.

• Funds can be borrowed when needed, repaid, and borrowed again.

• The interest rate is usually variable.

• Interest is charged only on the amount used.

This option provides flexibility for homeowners who may not know exactly when or how much they’ll need.

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What is a Refinance?

A refinance means replacing an existing mortgage with a new one. This can be done to:

• Secure a better interest rate

• Extend the term of the mortgage

• Pull out equity as a lump sum

A refinance is often chosen by those who want predictable payments and stability.

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Key Differences

A HELOC is flexible, allows borrowing anytime, usually comes with variable rates, and requires interest-only payments.

A refinance provides a one-time lump sum, can be done at either a fixed or variable rate, and requires regular mortgage-style payments.