Tag Archive for: home equity loan

Which is better for you? Cash out refi vs home equity loan

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Which is better for you? Cash out refi vs home equity loan. Should you refinance your mortgage… or just get a home equity loan? This is a big question. And choosing the wrong path could cost you hundreds of thousands of dollars over time. Let’s break this down, compare the two options, and run through an example to show which one puts more money back into your life.

The Truth: Most People Default to a Cash Out Refi

Why? Because that’s what’s being advertised everywhere. It’s what the talking heads and big banks want you to do.

But here’s the truth:
A cash out refinance isn’t always the smartest move.
In fact, for most people right now, a home equity loan is a much better choice.

Why a Home Equity Loan Usually Wins

Especially if you bought or refinanced from 2020 to 2023, you probably locked in a great rate. So why would you give that up?

Instead of replacing your entire mortgage at a higher interest rate, you can leave it alone and just borrow what you need using a home equity loan.

Let’s look at what makes home equity loans so powerful:

✅ Fixed rate and fixed payments

Just like a mortgage or car loan — predictable and simple.

✅ Lower total cost over time

Because you’re only borrowing a small amount, the interest paid is much less.

✅ Faster payoff

Many home equity loans are 5–10 years. That means you’re not stretching out interest for 30 years.

✅ Keep your low original rate

Your current mortgage doesn’t change. That keeps your monthly payments lower overall.

Real-Life Example: $50K Mistake or $310K Mistake?

Let’s say you currently owe $300,000 on your mortgage at a low 3% rate. That gives you a monthly payment of about $1,265 over 30 years.

Now, imagine you need $50,000 for home repairs or to pay off high-interest debt. Here’s what happens with each option:

🚫Cash Out Refi

  • New loan: $350,000

  • New rate: 7%

  • New monthly payment: $2,328

  • Over 30 years: You pay $838,000 total

✅ Home Equity Loan

  • Keep your original $300,000 loan at 3%

  • Monthly payment: $1,265

  • Borrow $50,000 at 8% over 10 years

  • Monthly payment: $606

  • Total paid on both loans: $528,000

The Difference?

You’d spend $310,000 MORE by choosing the cash out refi.

Let that sink in: That’s $310,000 for the same $50,000 you needed.

And that’s not including the higher closing costs that come with a refinance — usually 10x to 20x higher than a home equity loan.

When a Cash Out Refi Might Make Sense

Yes, there are rare cases where a refinance works better. For example:

  • If your current mortgage is very small

  • If you need a very large amount of money

  • If your new rate is close to your old one

But those situations are rare — probably 95% of the time, a home equity loan is the better choice.

Use Our Free Calculator to Run Your Numbers

We made it simple for you. Use the calculator below to plug in your info:

  • What’s your current mortgage?

  • What rate do you have?

  • How much money do you need?

Take 5 to 10 minutes to do the math. You’ll likely be shocked at the difference.

Cash out refi vs home equity loan

The decision you make today could impact your family for decades.

Ask yourself:
How many hours would you have to work to make up $310,000?
How many extra years until you can retire?

Choosing the right loan means more freedom, more savings, and more peace of mind — now and in the future.

Final Thoughts

Don’t follow the crowd. Don’t fall for what’s “popular.”
Run your numbers. Use your brain. Protect your money.

Because when you do, you’ll find the best path for you.

👉 Use the calculator. See the difference. Put more money in your life — not the bank’s. 

Watch our most recent video to find out more about: Cash Out Refi vs Home Equity Loan: Which is better for you?

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Use the 80/20 Principle to Crush Debt Fast!

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Today we are going to show you how to use the 80/20 principle to crush debt fast! The 80/20 principle works for almost everything in life, including paying off debt. When you focus on the most important 20%, the other 80% falls into place. Let’s break it down step by step with real examples.

The 80/20 Rule and Debt

Think of losing weight. Exercise helps, but 80% of weight loss comes from eating habits. The same idea applies to debt. Paying it off isn’t just about making extra payments—it’s about lowering the cost of your debt first.

Example: The Weight Loss Struggle

Mike tried to lose 15 lbs over three months. He hit the gym, worked hard, and stayed consistent. But he only lost 4-5 lbs. The problem? His eating habits. He still ate chips and chocolate, making his progress slower and more frustrating.

Debt works the same way. If you don’t tackle high interest rates first, your payments feel like running uphill.

Step 1: Get Into Better Debt

Before making extra payments, make your debt easier to pay off. Lower your interest rates first.

Example: High-Interest Credit Cards

Imagine you have $10,000 in credit card debt at 24% interest. That means you’re paying $2,400 in interest every year. But what if you move that debt to a home equity line at 8%? Now you only pay $800 in interest, saving $1,600 a year. That’s money you can use to pay off debt even faster.

Step 2: Choose a Repayment Strategy

Once you lower your interest, pick a strategy that works for you. Snowball or avalanche—both help, but lower debt costs make them more effective.

Example: Credit Card Balances

  • Card 1: $7,500 at 24%
  • Card 2: $7,500 at 19%
  • Card 3: $5,000 at 15%

Your total payment is $500/month. Using the snowball or avalanche method, adding $100/month will take 3 years and 8 months to pay off. Plus, you’ll pay $8,000 in interest on a $20,000 balance.

Step 3: Refinance or Transfer to Cheaper Debt

A lower rate makes everything easier. Options include home equity loans, 0% credit card transfers, and debt consolidation.

Example: Home Equity Loan vs. Credit Cards

If you roll your $20,000 credit card debt into a home equity loan at 8%, your monthly payment stays around $600. But now, you pay off the loan in 3 years instead of 3 years and 8 months, saving $5,000 in interest. That’s money back in your pocket!

Step 4: Use 0% Credit Card Transfers

Some credit cards offer 0% interest for 12-18 months. There’s a small fee (3-5%), but it’s still cheaper than paying 24% interest.

Example: 0% Balance Transfer

If you transfer $20,000 to a 0% credit card with a 4% fee, you pay only $1,500 in fees over two years instead of $8,000 in interest. That’s a huge savings!

Step 5: Mix and Match for the Best Results

You don’t have to choose just one method. Combining strategies can work even better.

Example: Hybrid Approach

  • Move $20,000 to a home equity loan at 8%.
  • Keep paying $650/month (same as before).
  • Now, your monthly payment drops to $540, giving you an extra $110 per month for other expenses.
  • Over three years, you save $4,000+ in interest while freeing up cash each month.

Make Debt Easier to Crush

Debt feels overwhelming because high-interest rates make it harder to escape. The 80/20 principle says to fix the big problem first—the cost of your debt. Then, paying it off becomes much easier.

Ready to take control? If you’re looking for a home equity loan or line of credit, check out SmartWithDebt.com for resources to help you find the best option.

Let’s crush debt—fast!

Watch our most recent video to find out more about how to: Use the 80/20 Principle to Crush Debt Fast!

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Debt Consolidation EXPOSED: Do It the Right Way!

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Today we are going to discuss debt consolidation exposed: Do it the right way! The numbers don’t lie. We’re going to show you how to pay less instead of falling into a massive debt trap. If you’ve been told that consolidating debt with a new mortgage is the best move, think again.

What’s the Goal of Debt Consolidation?

For most people, lowering their monthly payments is the top priority. However, here’s the problem. Most lenders and TV personalities only focus on monthly payments instead of total debt costs.

At Smart With Debt, we love debt, when it’s used the right way. We believe in good, healthy debt that keeps more money in your pocket, not the lender’s.

So, let’s break down the numbers as well as expose the real cost of debt consolidation.

The $200,000 Debt Mistake

Let’s look at an example of a homeowner trying to consolidate debt:

  • Original Mortgage: $300,000 at 4% interest (from four years ago).
  • Current Mortgage Balance: $277,000 with 312 payments left (26 years).
  • Credit Card Debt: $30,000 across three cards at 21-24% interest.
  • Total Monthly Payments: $2,432 (Mortgage: $1,400 + Credit Cards: $1,000).

The goal? Lower the payments. But watch how lenders trick you into paying far more in the long run.

Refinancing at 7%: A Costly Move

If you refinance your $277,000 mortgage today at 7% interest, your new mortgage payment would be:

  • New Mortgage Payment: $1,800 per month.
  • New Loan Term: 30 years (360 payments).
  • Total Interest Paid Over Time: $664,000!

That’s over $200,000 MORE than your current loan!

Now, what if you refinance both your mortgage and your $30,000 credit card debt into one new loan?

  • New Loan Amount: $312,000 at 7%
  • New Payment: $2,075 per month (Yes, slightly lower)
  • Total Debt Paid Over Time: $747,000!

You just turned a $30,000 problem into a $747,000 mistake!

This is what lenders aren’t telling you.

The Right Way to Consolidate Debt

fInstead of rolling everything into a new mortgage at a higher rate, try this instead:

First, Keep Your Mortgage Intact.

  • You already have a low rate (4%)—don’t touch it!

Second, Use a Home Equity Loan Instead.

  • A fixed-rate home equity loan at 8% costs much less over time than refinancing your whole mortgage.
  • Loan Amount: $31,000 (credit card debt + closing costs).
  • New Payment: $376 per month (over 10 years).

Third, New Total Monthly Payment:

  • Mortgage ($1,400) + Home Equity Loan ($376) = $1,776 per month.

You save money upfront AND in the long run.

Key Takeaways: The Smartest Debt Strategy

  • Leave your low-rate mortgage alone!
  • Use a home equity loan to tackle high-interest debt.
  • Lower your payments AND reduce your total debt cost.
  • Avoid the debt trap of long-term refinancing!

Calculate Your Best Option

Want to see how this works with your numbers? Use our free Smart With Debt Calculator to compare:
Refinancing vs. Home Equity Loan
Total Interest Paid Over Time
Monthly Payment Breakdown

Download the calculator today!

Watch our most recent video to find out more about: Debt consolidation exposed: Do it the right way!

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What Is a Second Mortgage?

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Today we are going to answer the question, “what is a second mortgage?” A second mortgage is a loan that lets you borrow money against the equity in your home. Equity is the difference between your home’s value and what you owe on your first. For example, if your home is worth $300,000 and you still owe $200,000, you have $100,000 in equity.

With a second mortgage, you can use that equity to fund big expenses like home improvements, debt consolidation, or even investing in real estate. But unlike your first mortgage, a second mortgage doesn’t replace your current loan. It’s an additional loan on top of what you already owe.

Think of your home like a pie. The first mortgage claims the first slice. A second one gives you access to another slice of your home’s value, but it also comes with monthly payments and interest.

There are two main types:

  1. Home Equity Loans – You borrow a lump sum and pay it back over time.
  2. Home Equity Lines of Credit (HELOCs) – Similar to a credit card, you borrow as needed up to a limit.

Remember, a second mortgage uses your home as collateral, which means you could lose it if you don’t repay. That’s why it’s important to know the costs and risks before jumping in.

If you’re smart about it, a second mortgage can help you achieve your goals without selling your home. It’s a powerful tool when used wisely!

Contact Us Today! 

What is a second mortgage and is it right for you? Contact us today to find out more about how to turn your debt into your friend instead of your enemy! 

Free Tools For You! 

We also have free tools available! Accelerate Debt Payments Calculator to see which debt 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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Is a Cash-Out Refi the best choice?

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Today we are going to answer the question, “is a cash-out refi the best choice?” Thinking about tapping into your home’s equity? A cash-out refinance could be the answer. It’s a way to access the money you’ve built up in your home by replacing your current mortgage with a new one for more than you owe. The difference comes to you as cash. Keep in mind that interest rates should be first and foremost in your mind when making this move. While a cash-out refi is great for some, it can greatly impact others in the long run.

Is it the right move? That depends on your goals.

For example, let’s say Sarah has $200,000 in equity in her home. She decides to refinance and pull out $50,000. With the extra cash, she pays off high-interest credit card debt and starts a home renovation. Her new loan payment is manageable, and she’s saving on interest every month. For Sarah, it’s a win.

Now take John. He’s also sitting on equity and thinking about a cash-out refi to buy a boat. While it might sound like fun, the added loan balance and monthly payments could leave him stretched.

The key is to look at how the extra cash will improve your finances—or not. A cash-out refi can be a great tool for paying off debt, investing, or handling emergencies. But it’s not the best fit for everyone.

Before making the leap, think about how it fits into your bigger financial picture. Want to know more? Keep reading to see if this option could work for you!

Contact Us Today! 

Is a cash out refinance the best choice? 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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