The Home Loan Expert Suggests Alternatives to Home Equity Lines of Credit

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We get a lot of calls from people looking for what’s called a Home Equity Line of Credit (HELOC).

A Home Equity Line of Credit is EXACTLY what it sounds like; it’s a line of credit that is given to you based off the equity in your home. It’s like taking out a credit card on your house. You can borrow monthly from it, and repay as you go. Sounds great, right? Well, there’s a really terrific reason why NOT to take out a HELOC against your home in St. Louis.

HELOC loans don’t make any sense in the current marketplace, because interest rates on cash out refinances are so low right now. Why would you want 2 loans when all you need is one loan? If you have good credit, you can qualify for a cash out refinance from The Home Loan Expert, Ryan Kelley, which is a better alternative to a home equity line of credit. Doing a cash out refinance allows you to take out a lump sum of cash to pay bills, make home improvements, or anything that you want to use it for. It’s really the best way to use the equity in your home to your advantage.

Remember, the current rate is the difference. HELOC comes complete with an adjustable rate, which changes according to whatever the current rate is. It can be less, but when it’s higher, it can get extremely expensive. This is where our fixed rate refinance helps. It’s cost certainty. You know that your rate won’t change, regardless of what the market does. If it goes lower, however, you can always refinance again to the lower rate!

Another thing to remember about HELOC’s is that they are often designed to have interest only and balloon payments built-in. A cash out mortgage means that every payment that you make will lower your mortgage. Your debt to asset ratio improves with every payment. An interest only payment does nothing to help your credit and doesn’t actually reduce your loan amount, only pays off part of the interest. A balloon payment built-in is even worse. It’s like a sudden punch right in the wallet, and has caused more than one family to default on their mortgage. A cash out refinance is a consistent monthly payment with no surprises, no escalators, and no balloons.

We always caution borrowers one thing, though. Don’t take cash out just because you can. Refinancing to a lower interest rate, or reducing your time commitment, are completely valid reasons to refinance your mortgage. If there’s a need for cash, and you have a plan for it, a cash-out refinance is the way to go, to take advantage of today’s low rates. But if you need cash, the cash out refinance is your best bet.  In fact, CNBC recently wrote about the risks inherent in the practice.

Next Steps

Call us today at (800) 991-6494 or visit to apply online today. Nobody makes it easier to refinance your home to today’s lower interest rates than we do. Give us a chance to put some cash in your pocket today, and take a couple of months of payments off.