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Home >> Lending >> Home Equity
About Loans and Lines of Credit
We currently have a mortgage and a home equity line of credit. If we pay off our home equity line of credit and then re-finance, possibly with another lender, can we potentially take out another home equity line of credit, with a new lender, or possibly the same one? What are the downfalls?
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 Refinancing, however you do it, may be a wise choice or not. Looking at it strictly from the point of view of costs and benefits, you need to weigh the current vs. the future interest rate, change in monthly payment obligations, the costs of the refinancing, including legal fees, application fees, etc., and whether you will take cash out from the transactions.
Refinancing with no cash out can be effective if lower interest costs and therefore lower payments, will recover the refinancing costs within a short time, assuming that you plan to stay in your home for the foreseeable future. On the other hand, if you plan to stay in your home for only one or two years, refinancing may not be a wise choice for you. Increasing your overall debt or payment burden may not be wise in today's economic environment.
In short, it would be a good idea to sit down with a bank lender that you believe will give you a fair analysis, and provide a detailed description of your current loan accounts, including interest rates, monthly payments, etc., and the types of loans you are considering. A good analysis can't be made without the specifics of the loans involved, and the best analysis can be offered by someone who can engage you in a conversation, asking specific questions about your plans. If you'd like to try out some scenarios on your own, before meeting with a bank lender, take a look at some of the financial calculators in our Banking Tools section.
Published on BankingQuestions.com 1/16/09
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