Tag Archive for: cash out refinance

Is a HELOC More Dangerous Than a Credit Card?

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When it comes to borrowing money, many people wonder:
Is a HELOC more dangerous than a credit card?

The answer?
Yes… and no.

Let’s break it down using real examples so you can decide what’s right for your situation.

How HELOCs Are Less Risky Than Credit Cards

Let’s start with interest. That’s the big one.

  • Most credit cards charge around 24% interest.

  • A HELOC (Home Equity Line of Credit) is closer to 8%.

So, if you owe $10,000…

  • A credit card might cost you $2,400/year in interest.

  • A HELOC? Just $800/year.

That’s a difference of $1,600 — and that money stays in your pocket instead of going to the banks.

That’s a huge win for your budget.

Lower monthly payments mean less stress and fewer risks of falling behind. You’re also not paying extra just to carry the debt.

How HELOCs Are More Risky Than Credit Cards

Now let’s talk about the risk.

A HELOC is a mortgage. That means it’s tied to your house. If something goes wrong and you miss payments:

  • It affects your credit more than a credit card would.

  • You could even face foreclosure.

That’s a big deal.

You’re giving up equity in your home and putting your property on the line. This is why you should only use a HELOC if you know where your repayment will come from.

If lowering your interest helps you get ahead, great.
But if you’re falling behind already, a HELOC might only delay the problem.

What About a Refinance Instead?

If you’re thinking about using your home to consolidate debt, a HELOC is usually a smarter option than a full refinance.

Here’s why:

  • Refinances roll your entire mortgage into the new loan.

  • If your current mortgage is at 3%, why bump the whole thing to 6% or 7%?

  • A HELOC lets you borrow just what you need, at a lower cost (sometimes as little as $500 vs. $5,000+ for a refinance).

Plus, most HELOCs let you borrow up to 80–85% of your home’s value.

So, Is a HELOC More Dangerous?

Only if you’re not careful.

✅ If you need to lower your payments and have a plan:
A HELOC can save you thousands and reduce financial stress.

⚠️ But if you’re struggling to make payments already:
Tying that debt to your house could make things worse.

Download Free Tools

Want to see the real numbers for yourself?

📥 Download our free tools at Smart with Debt:

  • Credit Cards vs HELOCs

  • Refinance vs HELOCs

These side-by-side comparisons show how much you could save — or risk — based on your situation.

Make your debt work for you, not against you. Contact us today to find out more.
That’s what being Smart with Debt is all about.

Watch our most recent video: “Is a HELOC More Dangerous Than a Credit Card?”

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Hidden Wealth in Your Home: HELOC Qualification Breakdown

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Today we are going to talk about hidden wealth in your home. Unlocking the hidden wealth in your home starts with understanding how a HELOC (Home Equity Line of Credit) works as well as how to qualify for one. Let’s break it down step-by-step, so you can see if this option works for your needs.

What is a HELOC?

A HELOC is like having a financial safety net. It’s a second mortgage that lets you borrow money based on your home’s equity while keeping your existing mortgage in place.

Here’s the key: A HELOC is tied to your home’s lendable equity, which depends on your property value as well as how much you still owe on your first mortgage.

How Lenders Calculate HELOC Amounts

Everything comes down to CLTV (Combined Loan-to-Value). This calculation determines how much equity you can access.

Here’s how it works:

  1. Determine Your Home’s Value


    Find your property’s current market value. Use tools like Zillow or Redfin for a quick estimate or check with a local appraiser.

  2. Know Your Current Mortgage Balance


    Look at your latest mortgage statement to see what you still owe.

  3. Calculate Lendable Equity


    Most lenders allow between 80% and 90% CLTV. Multiply your home’s value by the lender’s CLTV percentage, then subtract your current mortgage balance.

Example:

  • Home Value: $400,000
  • Lender’s CLTV: 85%
  • Current Mortgage: $280,000

Calculation:

  • $400,000 × 85% = $340,000
  • $340,000 – $280,000 = $60,000 of available equity for a HELOC.

Why Choose a HELOC Over a Cash-Out Refinance?

To clarify, HELOCs are often better for smaller, flexible borrowing needs:

First, Lower Costs: No need to refinance your first mortgage, avoiding high closing costs.

Second, Keep Your Low Rate: If your existing mortgage has a great rate (e.g., 3%), you keep it intact.

Finally, Flexibility: Borrow only what you need, when you need it.

In most cases, you can access 5–10% more equity with a HELOC compared to a cash-out refinance.

How to Shop for the Best HELOC

  1. Compare Lenders: Start with local credit unions or mid-sized banks—they often offer the best terms.
  2. Focus on CLTV and Rates: Higher CLTV percentages and lower rates can save you money.
  3. Use Tools to Compare: Download our free HELOC Shopping Scorecard to track offers and find the best deal.

Take Control of Your Home’s Equity

In conclusion, a HELOC offers more than just money, it gives you options. Whether you’re funding home improvements, consolidating debt, or creating an emergency fund, your home’s hidden wealth can help you get there.

Start today by calculating your CLTV and comparing lenders. Smart debt is the key to paying less interest and keeping more money in your pocket.

Contact us today to find out more about: Hidden Wealth in Your Home: HELOC Qualification Breakdown

Watch our most recent video to see the calculations step by step! 

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Is a Cash-Out Refinance Right for You?

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Today we are going to discuss whether a cash-out refinance is right for you. A cash-out refinance can be a smart move, or it can lead to big regrets. The key is knowing when it works for your situation. Here’s how it works: You replace your current mortgage with a bigger one. The extra money comes to you as cash. Sounds simple? It is, but there’s more to think about.

For example, let’s say your home is worth $300,000, and you owe $150,000. You might refinance for $200,000, leaving you with $50,000 in cash. This money can help pay off high-interest credit cards, fund home improvements, or even kickstart a new investment.

But it’s not always the right choice. You’re taking on more debt, which means bigger payments. Plus, your home is the collateral. If something goes wrong, like a job loss, you could risk losing your home.

Here’s a good rule of thumb: Only use a cash-out refinance if the money helps you save or grow wealth. For example, using it to upgrade a rental property or consolidate high-interest loans can make sense. Using it for a vacation? Maybe not.

Understanding your goals and running the numbers will help you decide. It’s about making the cash work for you, not against you.

Contact Us Today! 

Is a cash out refinance right for you? Contact us today to find out more about cash out refinances, as well as other ways to use debt to your advantage.

Free Tools For You! 

We also have free tools available! Download our Cash Out Refi vs Home Equity Loan Calculator to see which option is best for you! 

Learn more!

Visit our YouTube channel to learn more about using debt instead of letting debt use you! 

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The Shortest Refinance Boom EVER – Good or Bad For You?

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For just a couple of weeks, we had what might be the shortest refinance boom ever. Interest rates dipped into the 5% range, which got everyone talking about cash-out refinances to manage their debt. But was it really the best option? Let’s break down why this might have been more of a blessing in disguise.

Why a Cash-Out Refinance Might Not Be Right for You

When rates dropped, many homeowners considered a cash-out refinance. The goal was simple: consolidate debt and make monthly payments easier. But for most people, this wasn’t the best option. Here’s why:

  1. You Lose Your Good Mortgage Rate
    If you have a mortgage with a low rate from just a few years ago, refinancing could double or even triple that rate. This means you’d be paying more on debt you’ve already been handling well.
  2. Higher Total Interest Over Time
    A cash-out refi stretches out your debt, adding interest over more years. So, even if monthly payments seem smaller, you’re likely paying more to the bank in the long run.
  3. Better Alternatives Exist
    Instead of locking into a higher rate for all your debt, other options could work better for managing specific debts, like credit cards or car loans.

Better Options for Your Debt

Refinancing isn’t the only way to free up cash and simplify your payments. These alternatives can put more money back into your life without adding to your mortgage balance.

1. Fixed-Rate Home Equity Loans

A home equity loan lets you tap into your home’s value without affecting your current mortgage rate. Unlike a HELOC, which is often adjustable, a fixed-rate home equity loan keeps your rate steady and predictable.

2. Balance Transfers to 0% Credit Cards

Got good credit? Consider moving high-interest credit card debt to a 0% APR balance transfer card. Even with a small transfer fee, the savings can be big. For example, transferring $10,000 at 25% interest to a 0% card could save over $2,000 in interest a year.

Use This “Break” to Get Financially Ready

With the refi boom gone (and possibly not coming back anytime soon), it’s a good time to look at other ways to get into better financial shape. Here are a few steps to consider:

  1. Improve Your Credit Score
    Aim for a 700+ credit score. This isn’t just about looking good on paper; it can make a big difference in the types of loans and interest rates you qualify for. With a high credit score, your monthly payments on things like credit card debt could drop by hundreds of dollars.
  2. Reduce High-Interest Debt First
    Focus on paying off higher-interest debts like credit cards and personal loans first. Lowering your overall interest costs frees up cash each month.
  3. Use Tools to Compare Options
    Tools like our free calculator let you compare a refinance vs. a home equity loan, so you can make the best choice for your needs.

Keep Debt Working for You, Not the Other Way Around

Debt doesn’t have to weigh you down. By choosing the right kinds of debt, you can focus on what matters now and build a solid future. Here are some tips for keeping debt manageable and beneficial:

  • Aim for “Healthy” Debt
    Debt can help you buy a home, car, or even fund a vacation. But always aim for manageable, “healthy” debt — the kind that supports your goals without stretching you too thin.
  • Focus on Debt That Lets You Enjoy Life
    Good debt isn’t about giving more to the banks; it’s about keeping more in your pocket. Imagine saving hundreds each month by switching to better debt and putting that money toward experiences you enjoy today and security for tomorrow.

The Bottom Line: Say Goodbye to the Refi Boom & Hello to Better Choices

The shortest refinance boom ever was, in some ways, a wake-up call. Yes, refinancing sounds appealing, but it’s not always the best path to financial freedom. Instead, use this moment to find better debt options, boost your credit score, and put more money back into your life.

For tips on finding the best debt solutions, visit us at Smart with Debt, where we guide you on smarter ways to handle your finances and keep your future bright.

Watch our most recent video to find out more about: The Shortest Refinance Boom EVER – Good or Bad For You?

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Cash-Out Refinance: Avoid the $250,000 Blunder Most People Make

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Are you thinking about a cash-out refinance? While it might seem like a great idea to free up some cash each month, it creates further financial strain in the future. Therefore, before you jump in, let’s look at the numbers in order to see how this decision could cost you a whopping $250,000 over time. Let’s begin by looking at the average debt provided by Dave Ramsey. 

What is a Cash-Out Refinance?

To clarify, a cash-out refinance allows you to take out a new mortgage for more than you currently owe, as well as pocket the difference. It’s tempting if you’re looking for some extra cash or want to consolidate debt. However, in today’s market, with interest rates climbing, you might be setting yourself up for a costly surprise.

Cash-Out Refinance
New Loan Interest Rate Monthly Payment New Total (Current Payment $2,669 – Cash-Out Refinance $1,962)
New Mortgage Balance $295,000 7% $1,962 $707 (Monthly Relief)

Cost of Cash-Out Refinance
Monthly Payment Remaining Number of Payments Cost Over Loan Life Additional Money Out of Your Pocket!

 (Refinance Cost $706,550 – Total Cost Previously $454,591 
$1,962 360 $706,550 $251,959

What is a Home Equity Loan?

A Home Equity Loan, on the other hand, is a type of loan where you borrow against the equity you’ve built up in your home. To put it another way, it’s a second mortgage with a fixed interest rate, a set repayment term, as well as consistent monthly payments. Unlike a HELOC, which acts like a credit line, a Home Equity Loan gives you a lump sum upfront that you repay over time. Therefore, it is a stable option for consolidating debt or financing big expenses.

Home Equity Loan
New Loan Interest Rate Home Equity Loan Payment  + Mortgage New Total (Current Payments $2,669 – Mortgage with HEL $1,959)

(Credit cards and auto loan paid off)
Home Equity Loan  $57,500 9% $793 + $1,166 = $1,959 $710 (Monthly Relief)

Cost of Home Equity Loan
Monthly Payment Remaining Number of Payments Cost Over Loan Life + Mortgage Additional Money Out of Your Pocket!

(Home Equity Loan Cost  $461,249 – Total Cost Previously $454,591 
$793 105 $83,287 + $377,962 =

$461,249

 $6,658

Monthly Payment Relief: What Does It Really Cost?

Sure, both options give you that monthly payment relief you’re looking for, however, only one of them doesn’t mortgage your future. Therefore, by choosing the home equity loan over the cash-out refinance, you will not only save big now, but in the long run as well. 

Out of Pocket Difference Between the Two Options 
Cash Out Refinance $706,550 $245,301
Home Equity Loan $461,249

Bonus: Short-Term Impact

Some people say they won’t keep their mortgage for 30 years. However, the financial impact of a cash-out refinance can be seen after just one year! 

BONUS: Cash Out Refinance: Cost By Year 
Year Cost 
First Year $12,975
Third Year $26,987
Fifth Year $42,894
Tenth Year $80,679 + $11,898 = $92,577

Your Best Option in Today’s Market

In today’s market, a home equity loan is often the better choice. It not only provides the monthly relief you need, but it also doesn’t cost you a fortune in the long run. Remember, it’s not just about getting by today, it’s about protecting your future, too. 

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