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Need Cash? Mortgage Cash-Out Refinance vs. Personal Loan

When most homeowners think about acquiring a large chunk of money – whether it’s to support an expanding business, tackle...

Published May 13, 2021

When most homeowners think about acquiring a large chunk of money – whether it’s to support an expanding business, tackle a home-improvement project, or to pay for a wedding – the first thing that usually comes to mind is to refinance and cash-out on a home or to get a personal loan. But just how do you choose between mortgage cash-out refinancing and a personal loan? We’ll help you figure it out.

Cash-Out Mortgage Refinancing

When taking out a home equity loan, you are essentially offering up a percentage of your home’s value as collateral. Lenders generally require you have at least 20% equity in your home before they will talk terms. The amount of equity you have also helps determine how much you may be able to borrow.

If the amount of money you want to borrow is significant, and your project timeline has some breathing room, a home equity loan may be a better option. Just know, borrowing minimums can be higher than for other loans and will take a few weeks to get approved. One upside to this option? It may also reduce your monthly mortgage payment.

Personal Loans
If you’re in a hurry and not looking to borrow a lot, personal loans have a few top-line benefits as well. One, the borrowing minimum is lower than a home equity loan so if you don’t need much – it can take just days to be approved. There are also fewer fees if any. However, interest rates tend to be higher because lenders aren’t relying on assets, such as a home, to back the loan. The repayment periods for personal loans tend to be shorter, too. They generally run between three and seven years.

When it comes to personal loans vs. cashing out your mortgage with a refinance, what you choose will depend on your own personal needs. Do you need to borrow a significant amount or not? And how fast do you need to receive a payout? You can borrow more with a mortgage cash-out refinance – which will take a few weeks to process – but a personal loan can be approved in a matter of days, though you’d likely have to borrow less but be hit with higher interest rates.














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Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. NMLS #399797. © 2020 KeyCorp® All Rights Reserved. Laurel Road is a federally registered service mark of KeyCorp. 855 Main St, 8th Floor, Bridgeport, CT 06604, USA. regulatory logo

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