We explore 6 key differences between the 2.
1. Refinancing involves changing your present loan however a house equity loan doesnâ€™t
Â once you refinance your home that is existing loan youâ€™re ending your present home loan and taking right out a fresh one out of its destination. Therefore, in the event that you switch loan providers as well you refinance this means the brand new loan provider will probably pay away your old loan to discharge your home loan and put a home loan of one’s own over your home. By comparison, a house equity loan is normally a loan that is separate may take call at addition to your home loan once you have sufficient equity.
Often, you have to keep at the very least 20 % of equity within the home, in other words. You are able to just borrow as much as a complete of 80 % of its value across all loans – though some loan providers may enable you to borrow more with Lenders Mortgage Insurance (LMI).
2. A house equity loan is oftentimes a relative credit line
A house equity loan is just a term that is general any loan that allows you to borrow up against the equity in your premises. But, numerous house equity loans appear in the type of a personal credit line.