Your home equity represents years of mortgage payments, market appreciation, and financial discipline. Accessing it should be strategic, not impulsive. This guide breaks down cash-out refinance rates vs purchase rates: the llpa cost in plain language, so you can make informed decisions about your money without getting lost in industry jargon. This guide will walk you through everything you need to know about cash-out refinance rates vs purchase rates: the llpa cost. ## The Core Differences The fundamental question: do you give up your low first-mortgage rate to access equity? ### Cash-Out Refinance: Starting Over A cash-out refinance replaces your entire mortgage with a new loan. If you have $225,000 remaining at 3.25% and need $60,000, you get a new $285,000 mortgage at current rates (7-8% range). **Payment impact example**: - Current: $225,000 at 3.25% = ~$979/month - New: $285,000 at 7.5% = ~$1,993/month - Increase: $1,014/month ($12,168/year) Over 5 years, that's $60,840 in additional payments just to access $60,000. The math rarely works in today's rate environment. ### Second Mortgage: Keep Your Low Rate A second mortgage (HELOC or home equity loan) sits behind your first mortgage. You keep your 3.25% rate on $225,000 and add a second payment for the $60,000. **Payment impact example**: - First mortgage: $225,000 at 3.25% = ~$979/month (unchanged) - Second mortgage: $60,000 at 8.5% (15-year) = ~$591/month - Total: $1,570/month - Increase: $591/month ($7,092/year) Same $60,000 access, but you save $423/month ($5,076/year) versus the cash-out refinance. Over 5 years, that's $25,380 in your pocket. ## Making the Right Choice ## Your Next Steps Don't rush into home equity financing without understanding your full picture: 1. **Calculate your available equity**: Use the formula (Home Value × CLTV Limit) - First Mortgage Balance. Most lenders cap at 80-90% CLTV. 2. **Evaluate your DTI**: Add up all monthly debt payments including the new loan payment, divide by gross monthly income. Aim to stay under 43-45% for comfortable budgeting. 3. **Get multiple quotes**: Rates and terms vary significantly between lenders. A 0.50% rate difference on $50,000 over 15 years costs/saves $3,000+. 4. **Understand the total cost**: Calculate total interest paid over the loan term, not just monthly payment. That helps you evaluate if the expense justifies the long-term debt. 5. **Have a repayment plan**: Especially for variable-rate HELOCs, know how you'll pay it down within 5-7 years rather than letting it linger at minimum payments. The right home equity strategy depends on your specific goals, risk tolerance, and financial situation. Take time to understand your options, run the numbers honestly, and choose the path that serves your long-term financial health - not just your immediate cash needs. --- *This information is for educational purposes only and does not constitute financial or legal advice. Loan terms, rates, and requirements vary significantly by lender, borrower qualification, and geographic location. Always consult with a licensed mortgage professional to discuss your specific situation and obtain personalized guidance. Interest rates, program guidelines, and market conditions are subject to change without notice.*