Real Estate and Home Mortgages - refinance or home equity loan?

I currently have a 5.75% mortgage on a $280,000 loan. I now have $30,000 equity built up in my home. The current appraised value of the home is $480,000. I need $100,000 for loan consolidations and improvements. Should I refinance the whole $350,000 or keep my current mortgage and take out a home equity loan for $100,000.

Thanks for the help.
optimom4810

If you only have $30,000 in equity, you can't borrow $100,000.
It would be best if you could work out a budget and plan to pay the debt off yourself. Refinancing the house or a HELOC does not pay off any debt, it just secures that same amount of debt with your house. Going from, for instance, an unsecured credit card and then paying it off with a mortgage, involving your house, isn't the best course to take.

Also, if you work on a cash out refinance to lump as much as you can into your mortgage, you are limited in how much of your equity you have access to. Most cash out refi's only allow you to borrow up to 90% of the home's value--and that includes your closing costs and escrow deposits, so you get even less money due to that.

A HELOC sounds good, and it may allow you to use the full amount of your equity, but the rate on these is usually attached to the prime lending rate, which most people have learned to regret. The rate is often not good these days, even with any rate cuts that may come from the Fed. Additionally, you should think of a HELOC as just another credit card, since it is based on revolving interest, like a credit card, not simple interest like a typical mortgage. Again, you've just taken your unsecured or lightly secured debt and managed to associate it with your home--that's not how you build personal security.

I would urge you to consider other options, a strict budget and lifestyle changes before doing anything like this. In the long run, it can cost you a lot more money and it involves your home in your other issues, which is not good for stability. If you use up all of your equity doing this, you find yourself in a situation where you can't afford to sell the house when/if "life" happens and things get bad. People lose jobs, get sick, die...whatever. It can make a bad situation even worse when you're stuck in a house with no equity that you can't get out of on your own.

Think very seriously about this, it's a much bigger decision than most people think.

I'm re-posting my budget article. I hope you get some use out of it:

How do you do a proper BUDGET and what is the Snowball Method to get out of debt (http://forum.doityourself.com/showthread.php?p=1234362#post1234362)