When financing a home remodel, which do you recommend--Refinancing, or a line of credit?

caveat: I am only considering refinancing my "second" which is about 10% of my total home loan. The interest only varies by less then half a percent from the refi versus the line of credit.

Public Comments

1. I suggest you find out the interest and repayment terms for both and sign-on the one that is most economical and suits your budget.
2. Even though the interest varies by less than 0.5%, over several years, that can make a significant difference in the total cost of the loan. Also, the fees for refinancing vs. a line of credit should also be compared. Sometimes there is a large difference. By considering both the total cost of the loan and the total fees of each can you figure which would be the best deal for you. There are actually many more considerations, and the attached link compares refinancing vs. line of credit loans.
3. I would have to know a little more about what you are looking to do with your future finances (inclusive of this property) and how exactly you have your home financed now in order to give you a precise assessment of what the appropriate move would be, but generally speaking: An equity line is nice and it's convenient, but in the same respect it can become a burden, just like a high balance credit card. If you have a plan already in place to be able to pay that HELOC (Home Equity Line of Credit) off in a short schedule of payments, than go for the HELOC. If you do not, then your best choice is to do a straight Refinance. You will get the money at a lower cost (no matter how insignificant a difference in rate) and you will kill two birds with one stone. You see, most everybody that gets a HELOC ends up refinancing again with-in the following year or two, in an attempt to consolidate their debt. In almost every case, you end up saving a lot of money in a debt consolidation like that, but you LOSE money by having to refinance a second time to close the HELOC. I always say, "do it right, do it once."
4. I suggest finding a local bank that does not charge fees for 2nd mortgages. Most in my area (IL) don't charge. Ask for a HELOC that has a "fixed rate option". Harris Bank for example, has a HELOC that you can lock down the rate on all or a portion of the line. This gives you the best of both worlds. The HELOC allows you to draw funds when needed, so you are not paying interest on money you may not need all at once. Once your improvements are complete, lock the rate on your used portion of the line. I'm sure if you look around, you can find a bank with a similar program if you don't have a Harris Bank in your area. Good luck!