Think About the Long Term. Estimate how long you expect to stay in your current house. Depending on the severity of your situation and the real estate market at the moment, you might even want to consider selling your home altogether and taking on a short-term rental in your new locale. If you expect to stay in your current home for a few more years, the flexibility of a home equity loan may work for you. Otherwise, a refinance can restart the clock on your fifteen or thirty-year term.

How Much Cash Do You Need? A flexible home equity loan or line of credit may allow you to write checks for only the amount you need to get by. If you experienced a job loss, you can borrow against your equity in smaller chunks and repay your loan quickly once you get back on your feet. If you or a family member suffered a medical emergency that will permanently reduce your income, you may want to refinance your house to accommodate your new budget.

Will Your Equity Drop Below Twenty Percent? In an extreme situation, when you need to borrow so much money that your equity will drop below twenty percent, you may have to accept a home equity loan to prevent expensive personal mortgage insurance from kicking in on your primary mortgage.

Can You Handle the Expenses? Refinancing may make the best long-term sense, but your current condition may leave you without the cash flow to accommodate fees and closing costs. If you can find a lender who can refinance your home with no closing costs, you may find yourself facing a higher interest or even a prepayment penalty that locks you into that mortgage for life. Although a short-term home equity loan may carry a higher interest rate, you may be able to pay it back fairly quickly and avoid some of the long-term expenses it brings.