What is the difference between a home equity loan and a refinance?

A home equity loan and a refinance are two different types of mortgages, each with a different purpose and process. A home equity loan is a type of loan where a borrower can use the equity they have built up in their house to gain access to cash. With a home equity loan, the borrower takes out a second mortgage and uses the money to pay for items such as renovations, paying off debts, educational expenses, and more. The home equity loan is secured by the equity the borrower has built up, so the lender knows the loan will be paid back. A refinance is the process of replacing an existing loan with a new loan, paying off the first loan with the proceeds from the new loan. A refinance is typically used to lower interest rates, reduce loan term length, or switch from one type of loan to another. Refinancing is also a way to use the equity that has been built up in a home to take out a larger loan than what was originally borrowed. This can be used to make investments or help with other financial needs. In summary, home equity loans are taken out so a borrower can access the equity they have built up in their house, while a refinance is done to lower interest rates, pay off a larger loan, and use the equity they have in their house.

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What is the difference between a home equity loan and a refinance?

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