Refinance vs HELOC

If you want to refinance your current mortgage to save money or take out a Home Equity Line of Credit (HELOC) for access to extra funds, Bellco Federal Credit Union can help you decide which is a better option.

Bellco FCU is a member-owned, not-for-profit federal credit union. Since 1938, when we were called the Bell Telephone Credit Union, we have provided unique financial products and services to individuals and small businesses. As one of the best mortgage lenders in Berks County, PA, we are committed to helping your family build a secure financial future.

Membership in Bellco FCU is open to people who live, work, worship, or attend school in Berks County, PA. Simply open a Member Savings account with as little as $5 and set up your membership in a few simple steps.

About Mortgage Refinancing 

Refinancing is when a borrower takes out a new mortgage to pay off his or her original mortgage. It is usually done to reduce monthly payments, lower your interest rate, or take cash out of your home equity for large purchases. If you have a good credit history, refinancing can also be a good way to convert an adjustable-rate mortgage to a fixed-rate mortgage.  

If you can refinance your current mortgage at a lower interest rate, you can potentially save hundreds of dollars a year in monthly payments. Each time you refinance, however, you will add more principal to the end of the loan and extend its term, so you’ll have to decide if refinancing makes financial sense.

In exchange for a lower interest rate, you will pay mortgage points (also called discount points) to the lender at closing. One point is equal to 1% of the loan amount (or $1,000 for every $100,000 you borrow). Before you decide to go forward, do the math to see when you will start saving money.

About HELOCs

A Home Equity Line of Credit (HELOC) gives you access to a line of credit with a set limit, somewhat like a credit card. The amount of the loan is based on the equity you have built up in your home.

The interest rate on a HELOC may be lower than that of a traditional fixed-rate mortgage, credit cards, and other types of personal loans, but the rate is adjustable (not fixed), which means it may change over the life of the loan.  

During what is called a “draw period” (typically 5 or 10 years), you can make as many withdrawals as you like up to your credit limit, if and when you need the funds. The HELOC can be an excellent solution when you need to borrow small amounts over a longer period, such as for an extensive home renovation project or to pay ongoing tuition fees.

If you know you need a large sum of money right away, you may prefer a traditional Home Equity Loan which provides funds in a lump sum at a fixed rate for a fixed term, similar to refinancing your mortgage.

Bellco FCU can help you refinance your mortgage or determine how much you can afford to borrow with a HELOC. Get in touch with us today!