Home Equity Loans/ Refinancing

As a current homeowner, you may want to undertake a home renovation project or you might need cash for another financial goal. You may be hesitant to consider a cash-out refinance, which is a type of refinance where you trade in your existing equity for a new  loan.

 

Luckily, you have options. Both home equity loans and home equity lines of credit (HELOCs) can help you get the money you need.

A HELOC is a type of second mortgage that allows you to borrow money against the equity in your home as a line of credit. You can use the equity in your home to pay for whatever you need, such as home improvements, education and consolidating credit card debt. The monthly payments are generally interest-only payments based on the outstanding principal balance owed. The interest rate is variable, meaning it can change monthly depending on the prime index. A HELOC often has a lower interest rate than some other common types of loans, and the interest may be tax-deductible. Please consult your tax advisor regarding interest deductibility as tax rules may have changed. 

Refinancing the mortgage on your house means you’re essentially trading in your current mortgage for a newer one – often with a new principal and a different interest rate. Your lender then uses the newer mortgage to pay off the old one, so you’re left with just one loan and one monthly payment.

There are a few pros and cons of refinancing. You can use a refinance to make use of your home’s equity, get a better interest rate and/or lower monthly payment. A refinance could also allow you to remove another person from or add them to the mortgage.

However; the upfront costs required for refinancing may mean the lower monthly payment isn’t worth it. That’s why it’s important to understand the refinancing process and make sure it’s the right move for you.

There can be major benefits of refinancing a mortgage, but the pros depend on the terms of the refinance and your individual situation and goals. And while you can get the following benefits from a refinance, there may be some trade-offs.

You Could Pay Off Your Loan Faster
You can refinance your mortgage into a new loan with a shorter term (for example, going from a 30-year loan to a 15-year loan). By shortening your loan term, you’ll gain more equity in the home faster and pay the loan off quicker. That means you’ll own your home free and clear earlier and reap benefits such as saving money on interest and having more money each month when you no longer have a mortgage payment.

When you shorten the length of time you take to pay off the loan, you shorten the length of time you pay interest on that loan, meaning you’ll pay less interest over the life of the loan. But what if you don’t shorten the length of the loan? You could still end up paying less over the life of the mortgage.

If your refinance rates are low, you may be able to lower your interest rate. Since you pay interest until you pay off the loan, this will save you on the total amount of interest you pay over the life of the loan.

At Citizens State Bank, we believe in relationship-driven banking. Our lending decisions are made locally, which means faster underwriting, more personalized service, and a team that truly knows your market. These are not loans we quickly sell off; when you borrow with us, you remain part of the Citizens family. 
Our home equity products are designed to fit real-life needs:
HELOCs give you flexible access to cash when you need it.
Fixed-rate home equity loans provide predictable, steady payments.
Mortgage refinancing options (including cash-out refinances) that help you tap equity, lower rates, or shorten your payment term.

Talk With a Local Mortgage Specialist: Speak to one of our experienced loan officers to discuss your goals, whether it's debt consolidation, home improvement, or using equity for another purpose.
Evaluate Your Equity: We help you calculate your home’s current equity and determine how much you might qualify to borrow. Our tools and guidance let you compare HELOC vs. home equity loan vs. refinance.
Get Pre-Qualified or Apply: Our process is straightforward. We’ll help you gather your income, assets, and credit information so that you can apply confidently and efficiently.
Receive a Loan Offer: Once pre-approved, we'll present options tailored to you, including fixed-rate or variable-rate options, term lengths, and payment schedules. Our local underwriting team makes decisions quickly.
Close and Access Your Funds:
For a HELOC, you’ll have a credit line you can draw on during the “draw period.”
For a home equity loan, you'll get a lump sum and make fixed monthly payments.
In a refinance, we’ll pay off your current mortgage and set up your new loan terms.
Manage Repayment:
HELOC: You typically pay interest only during the draw period, then begin principal repayment.
Home Equity Loan: You pay principal and interest with a fixed payment.
Refinance: Your payment is based on your new loan structure (term, rate, etc.).

Your home equity can be a powerful financial tool. Here are some of the most common (and beneficial) ways our clients use it:
Home Renovations: Upgrade your kitchen, finish a basement, or invest in energy-efficient improvements.
Debt Consolidation: Pay off high-interest credit cards or personal loans by leveraging lower-rate home equity borrowing.
Education: Use home equity funds to invest in tuition, training, or your family’s future.
Major Purchases or Life Events: From weddings to starting a small business, access needs-based capital at favorable rates.
Emergency Fund: Use your equity line as a financial safety net, with access when you need it most.

Refinancing makes sense when your goals are aligned with potential benefit:
Lower Your Rate: If interest rates have dropped, a refi could save you money.
Shorten Your Loan Term: Transition from a 30-year to a 15-year mortgage to build equity and pay off the home faster.
Cash-Out Refinance: Pull out equity to invest, consolidate, or cover large expenses.
Change Loan Type: Switch from adjustable-rate to fixed-rate to lock in stability.