Refinance

QI Want To Pay Off A Home Equity Line Of Credit (heloc) And Pull Out Additional Cash. Which Is Better: A 10-year Line Of Credit At A Variable Rate, A 20-year Fixed-rate Home Equity Loan Or A Cash Out Refinance?
ABorrowing money you don't need is expensive. But, if you can invest the additional cash at a higher after-tax rate of return than the after-tax cost of debt, it can be to your advantage to borrow the money and invest it until you need it. To find out the after-tax cost of debt, multiply your loan rate by the quantity one minus your marginal federal tax rate minus your state tax rate. Taking this approach to invest in the stock market isn't for the faint of heart, especially if the value of your stocks heads south. Paying back money that you lost in the market is never fun. The best option is to roll the refinancing up into a new first mortgage, preferably a 15-year fixed rate mortgage. You'll have higher closing costs on a first mortgage than you would on a home equity loan, but reducing your interest expense in repaying the old HELOC will make it worthwhile and you'll have financed your cushion at a lower rate as well.