10/28/2010 If you're in a situation where you need some additional cash and want to tap into the equity of your home, one of your best options is to open a home equity line of credit (HELOC). However, if this option is unavailable to you or if you have already accessed the maximum amount of money available to you through a HELOC, you have two other options. You can either refinance your mortgage or sell your home.
A refinance is often a simpler process than a home sale. If you sell your home, you'll have to find a new place to live. A home sale is almost always followed by a home purchase. Unless you're ready for a new home, you should probably refinance.
Selling your home and purchasing a new one may give you the opportunity to build higher wealth over time. Homeowners, when they purchase new homes, are often able to "purchase up" into bigger and better properties. This higher home value may provide you the opportunity to build more equity over the long run.
A refinance may cost you more money over the long term. If you're unable to qualify for one of the lowest mortgage rates available, you might get stuck with a new mortgage that's worse than the one you had before. This is a huge risk if you have a low credit score. If you sell your home and purchase a new one, your new home's appraised value may help you qualify for a better loan.
Still, selling is much more risky and difficult than refinancing. You'll have to weigh the pros and cons for yourself. The bottom line? Find out what type of refinance loan you qualify for. Find out what your home would sell for. Then check out the local real estate marketplace and see if you can save more by moving to a new place or refinancing.
