Strategy #1: Rate and Term Refinance

A Rate and Term Refinance is the simplest form of mortgage refinancing—it replaces your existing mortgage with a new one, either with a different interest rate or term length. It’s not about pulling out extra cash but fine-tuning your mortgage to match your budget or long-term plans.

Key Benefits of a Rate and Term Refinance: This mortgage refinance strategy helps optimize your mortgage structure, offering potential savings on interest over time, more manageable payments, and flexibility in aligning your loan term with future financial plans.

A Rate and Term Refinance may be right mortgage refinance strategy if you want to:

• Lower Your Monthly Payments: Perfect for homeowners looking to free up room in their monthly budget by extending the loan term or securing a lower rate.
• Shorten The Loan Term: For homeowners who want to pay off their mortgage sooner or save on interest costs, shortening the term can be a game-changer.‍
• Reduce Your Interest Rate: If you took out your mortgage when rates were higher, a Rate and Term Refinance might help you lock in a lower rate, leading to significant savings in your monthly budget and over the life of the loan.

Key considerations for a Rate and Term Refinance:

Rate and Term Refinance Pros

• Lower monthly payments 
• Potential savings with a lower rate
• Flexible term adjustments

Rate and Term Refinance Cons

• Closing costs involved
• Could extend the loan term and increase total interest if refinancing to lower monthly payments

‍

Did you know? Lower Offers Free Refi for Life ✨

Buy or refinance once with Lower, and we’ll cover the lending fees on your future refinances, for life.* Expect to save at least $1,500 every time you refinance. For free. For life. And yeah—for real.

Strategy #2: Cash-Out Refinance

A Cash-Out Refinance takes your existing mortgage and replaces it with a new, larger loan, allowing you to “cash out” some of your home’s equity. It’s a great option if you have big expenses on the horizon and prefer a one-time payout.

Key Benefits of a Cash-Out Refinance: This mortgage refinance strategy gives you a lump sum to cover larger expenses, help you consolidate debt, or support other investment goals, all rolled into a single mortgage payment.

A Cash-Out Refinance may be the right mortgage refinance strategy if you want to:

• Consolidate Debt: If you have high-interest debt, a Cash-Out Refinance can help you roll it into your mortgage with a lower interest rate, simplifying your payments and potentially saving on interest.
• Renovate Your Home: For those ready to take on a home improvement project or addition, a Cash-Out Refinance can provide the funds you need in one upfront payment.
• Make Investments or Major Purchases: Some homeowners use a Cash-Out Refi to leverage their home’s equity for big purchases, like a business startup, a second home, or a new vehicle.

Key considerations for a Cash-Out Refinance:

Cash-Out Refinance Pros

• Access to a large sum of cash
• Potential to lower interest rate on debt
• Single monthly payment

Cash-Out Refinance Cons

• Increases loan balance
• Closing costs
• Could extend loan term
• Higher monthly payments if not careful

Strategy #3: Home Equity Line of Credit (HELOC)

A HELOC is a flexible home equity financing option, offering a revolving line of credit based on the equity you’ve built up in your home. Unlike a refinance, it doesn’t affect your primary mortgage, and you can draw funds as needed.

HELOC Key Benefits: This home equity financing strategy gives you on-demand access to funds with competitive interest rates, making it a flexible solution for managing ongoing expenses.

A HELOC may be the right home equity financing strategy if you want to:

• Finance Home Renovation Projects: If you have a long-term or phased renovation project, a HELOC can be a great fit. You can withdraw funds in stages, only paying interest on what you use.
• Access as an Emergency Fund: A HELOC can act as a financial safety net, giving you access to funds if an unexpected expense arises, all without altering your main mortgage.
• Finance Education and Tuition Costs: This option can be a practical way to cover tuition or other educational expenses on an as-needed basis, without taking a full loan upfront.

Key considerations for a HELOC:

HELOC Pros

• Flexible access to funds
• Pay interest only on the amount used
• Does not impact primary mortgage

HELOC Cons

• Variable interest rates may fluctuate
• Potential for overspending
• Repayment terms can vary

‍

Unlock Up to 95% of Your Home Equity with Lower

Here at Lower, we offer a HELOC up to 95% loan-to-value (LTV) while the industry standard is only 80%. The difference between 80% and 95% LTV can increase the amount you can access by tens of thousands of dollars.

Learn more

Strategy #4: Home Equity Loan

A Home Equity Loan provides a lump sum based on your home’s equity, functioning as a second mortgage with a fixed rate and term. It’s a good home equity financing option if you need a specific amount for a one-time expense and prefer the stability of a set monthly payment.

Key Benefits of a Home Equity Loan: This home equity financing strategy offers the stability of a fixed rate and predictable monthly payments, making it ideal for one-time, large expenses. With a Home Equity Loan, you can access funds without altering your primary mortgage, allowing you to keep it intact while achieving your financial goals.

A Home Equity Loan may be the right home equity financing strategy if you want to:

• Make a Large, One-Time Purchase: For big expenses, like medical bills or a major repair, a Home Equity Loan provides the funds you need with fixed terms.
• Consolidate Debt with Fixed Terms: If you’re looking to consolidate debt without altering your primary mortgage, a Home Equity Loan can give you fixed-rate predictability.‍
• Start a Business or Make an Investment: This option is a good fit for homeowners who need a lump sum for starting a business or making investments, without touching their main mortgage terms.

Key Considerations for a Home Equity Loan:

Home Equity Loan Pros

• Fixed interest rate
• Predictable payments
• One-time lump sum

Home Equity Loan Cons

• Requires a second monthly payment 
• Could affect long-term home equity

Home Equity Loan vs. HELOC: Which is Right for You?

When tapping into your home’s equity, choosing between a Home Equity Loan and a HELOC can make a big impact:

• Home Equity Loan: Perfect for large, one-time expenses, with a fixed rate and predictable monthly payments, giving you financial stability.
• HELOC: Great for ongoing or flexible needs, like phased renovations or education costs, allowing you to draw funds as needed with a revolving line of credit.

Consider your goals: 

• Need a lump sum with consistent payments? A Home Equity Loan is likely best. 
• Looking for flexibility? A HELOC offers on-demand access to funds.

Dive deeper

Conclusion: Reach out to a mortgage advisor to find the right refinancing or home equity strategy.

With so many options for mortgage refinance and home equity financing, choosing the best fit comes down to understanding your financial goals. Whether you’re looking to reduce monthly payments, access funds for a big expense, or manage debt, there’s a solution to match. Take a close look at your priorities and contact a Lower Mortgage Advisor who can help you meet your goals.