“We WILL get through this together.” 

Home equity loans & HELOCs

Home equity loans and home equity lines of credit (HELOCs) are common ways homeowners can access their home equity. Though both could be helpful in times of financial struggle, HELOCs are likely the best of the two options during the COVID-19 outbreak.

Home equity loans act as a second mortgage and require monthly repayment. HELOCs, on the other hand, work like credit cards. Homeowners can draw upon them as needed and repayment is usually required for many years (10 years is most common). HELOCs also come with lower origination fees than home equity loans.

Refinancing

Refinancing can be a good way for homeowners to create cash flow—especially with today’s low rates, according to Nicole Rueth, producing branch manager at mortgage lender The Rueth Team.

“While I believe the duration of today’s volatility will be short, the after-effects could linger for 12 to 18 months,” Rueth says.”However, with mortgage interest rates at historically low levels, homeowners can turn to the generous equity they’ve accumulated in the last eight years with a few refinance options.”

There are two ways refinancing can help homeowners during this time: First, by lowering their interest rates and monthly payments, thereby freeing up more cash. This is called a rate-and-term refinance.

The second way is via a cash-out refinance, which allows homeowners to replace their existing mortgage loan with a new one—one that’s higher than their current loan balance. They then keep the difference in cash.

It’s not for everyone, but definitely an option for those who have it.