Finance
A Minnesota homeowner has a first mortgage at 3.5% and wants to refinance to take cash out for home improvements. Current rates are 6.5%. The homeowner should consider:
ARefinancing the entire first mortgage to cash out
BA home equity loan or HELOC to access equity without changing the existing low-rate first mortgage✓ Correct
CA personal loan from a credit union
DSelling the home to access the equity
Explanation
When a homeowner has a below-market first mortgage rate, refinancing the entire first mortgage at a higher rate to cash out is usually financially disadvantageous. A better approach is a home equity loan or HELOC, which accesses equity through a second mortgage without disturbing the favorable first mortgage rate.
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