For someone that has been paying off a mortgage loan for several years, it might come time for them to consider a refinance or a home equity loan.  But knowing which one to choose can be a tough choice.  While they are both similar to a regular mortgage that someone takes out when buying a house, they will have different rates and one could work out better for someone while the other might not help them out.     

No matter if someone chooses to take out a home equity loan or to refinance mortgage interest rates that they are already paying off, they are choosing to get a hold of equity that they have been building on their home.  Often times someone will choose to refinance in order to pay off their first mortgage at a lower interest rate.  Whereas a home equity loan is taking a loan out to get the money that a home has earned in the time since they began paying back their mortgage loan.   

Where the difference lies between the refinance loan and the home equity loan, is that the home equity loan is based on the property value, whereas when someone chooses to refinance mortgage interest rates, they are taking out another loan to repay the first mortgage at a lower interest rate. 

 Home equity loans can be taken out in a number of different ways.  The person can choose to get the home equity loan money in a lump sum of money, as a line of credit, or as monthly installment payments.  For the avid spender, it might be wisest to get the home equity loan as monthly installments, in order for the person to control their spending.  In some cases, a person will choose to take out a home equity loan in order to remodel the house, or to restore something on the property.  In this case, it will benefit the person to take out the equity as a line of credit in order that they will be able to take out the money as it is needed. 

 When a person chooses to refinance mortgage interest rates, they are still getting extra money, should they have the option to get a cash-out refinance; but it will have to be paid back at some point.  For example, when someone has half of their original mortgage loan paid off, they can refinance the loan at a higher value, and pocket the difference.  This will then provide them the remaining balance to pay off whatever it is they needed the money for, and the money saved can be taken out as the person needs as well.  The difference in the interest rates will give the person that extra money to use just like in the home equity line of credit.  However, when someone gets a cash out refinance, they are going to have to expect a higher interest rate. 

 Choosing between a home equity loan line of credit and a refinance will depend on how much equity the person has on their home, as well as how much money they still owe on their mortgage loan.  If a person is almost done paying off their mortgage loan, they might not benefit from a refinance, since they will have to pay off interest rates again.  But if they have a lot of equity in their home, they should get a home equity loan and see a lot of extra money.