I Cried in a Bank Parking Lot Over a Mortgage Decision

Not gonna lie, this whole thing made me cry. Like actual tears in my car in a bank parking lot. I’m not usually emotional about money stuff but this decision had me stressed for weeks. My wife kept telling me to just pick one already, but I was so scared of messing up.

We needed $42,000. Our son needed braces – $6,500. Septic system failed inspection – $11,000. And we really really wanted to enclose the porch before winter because our heating bills were insane. Guy quoted $24,500 for that.

Been in our house since 2020. Got a crazy good rate back then – 2.95%. Everyone told us we were lucky. At the time I didn’t really get why, but now I do. Current rates are like 7.2% or something. That’s more than double what we’re paying.

Started researching how to get the money and kept seeing this home equity loan vs refinance debate everywhere. Half the websites said do one thing, the other half said do the other. I was so confused I actually got a headache reading about it.

The First Bank Lady Confused Me More

Went to our bank where we have checking and savings. The lady named Michelle was nice enough but she kept using words I didn’t understand. Loan-to-value ratio. Cash-out refi. Subordinate lien. I just kept nodding like I got it but I didn’t get any of it.

She ran some numbers and said we could refinance for $267,000. We owe $225,000 now, so that would give us our $42,000. Payment would be $1,790 a month. Currently paying $1,520. So it’d go up $270 monthly.

I asked if that was our only option. She said we could also do a home equity loan but seemed like she didn’t really want to talk about that. Just kept pushing the refinance. It made it sound like that’s what most people do. I left feeling more confused than when I walked in.

My Sister-in-Law Actually Helped

My sister-in-law Amy works as a teacher but her husband does something with mortgages. Not selling them, like the behind-the-scenes paperwork stuff. Asked if she could have him call me because I was totally lost.

Dave called me that night. Super chill guy, didn’t talk down to me at all. I told him about the refinance Michelle suggested. He asked what my current rate was. I said 2.95%. There was this long pause. Then he goes dude, don’t refinance. You’ll hate yourself.

That really got my attention. Dave explained the home equity loan vs refinance thing in a way that actually made sense. He said refinancing means my 2.95% disappears forever. Gone. Can’t get it back. I’d have a new mortgage at 7.2% on all $267,000.

He said think about it like this – I already borrowed $225,000 at 2.95%, which is crazy cheap. Why would I give that up and reborrow it at 7.2% just to get $42,000? That’s paying way more interest on money I already got at a better rate.

My brain finally clicked. That’s exactly what would happen. I’d be paying 7.2% on $225,000 that I already have at 2.95%. Just to get the extra $42,000 in cash.

Finally Understanding Home Equity Loans

Dave said a home equity loan is completely different. My original mortgage doesn’t change at all. Still 2.95%, still the same payment, still paying it off in 28 more years. The home equity loan sits on top as a second loan.

The rate would be higher – he guessed probably 8.5% or 9% with my credit score. That sounded scary. Why would I want to pay 9% when the refinance is 7.2%?

Dave explained the 9% only applies to $42,000. Not the whole mortgage. So I’m paying 2.95% on $225,000 which is awesome and 9% on just $42,000 which isn’t great but whatever. Way better than paying 7.2% on the entire $267,000.

He did rough math. Home equity loan payment would probably be around $360 a month for 12 years. Add that to my current $1,520 mortgage and I’m at $1,880 total. That’s actually $90 more per month than refinancing.

I said wait, so refinancing is cheaper monthly? Dave said yeah, but look at total interest. He said over the life of the loans, I’d pay like $200,000 more in interest by refinancing compared to the home equity loan. Maybe more.

That’s when the home equity loan vs refinance choice became super clear. Yeah I’d pay more each month, but save insane amounts long-term.

Why I Cried in the Parking Lot

Went back to the bank to ask Michelle about home equity loans specifically. She pulled up numbers. Rate would be 8.7%, payment $355 monthly for 12 years. Closing costs were $1,850.

Then I asked her to show me total interest on both options over the full loan terms. She seemed annoyed but did it. The refinance would cost me about $254,000 in total interest over 30 years. Keeping my current mortgage plus the home equity loan would cost about $98,000 total interest combined.

That’s like $156,000 difference. To get $42,000 in cash.

I said I wanted the home equity loan. Michelle tried to talk me out of it. Said the monthly payment was higher, the rate was higher, I’d have two separate payments to manage. Made it sound like I was making a mistake.

But I know the math now. Thanks to Dave, I actually understood what I’d be paying. Stuck with the home equity loan decision. Michelle seemed kinda irritated but whatever, it’s my money.

Got to my car and just sat there. I started thinking about how close I came to refinancing without understanding. Would’ve cost my family $156,000 extra over time. I started crying. I called my wife and could barely talk. She thought something terrible happened. I had to explain I was crying because I almost made a huge financial mistake but didn’t.

She laughed at me but in a nice way. Said she was proud I figured it out.

What Actually Happened

Got the home equity loan. Application took three weeks. Had to provide tons of paperwork – W2s, tax stuff, bank statements. Some guy came and walked around our house taking pictures for the appraisal.The home equity loan vs refinance comparison is completely different when you see what it costs over 10, 20, 30 years.

Rate ended up being 8.7% like Michelle said. Payment is $355 a month. Yeah, we’re paying $1,875 total now between both mortgages. It’s tight for some months. But I know we’re saving a fortune long-term and I kept my 2.95% rate.

Fixed the septic, got our son’s braces, enclosed the porch. The heating bill dropped by like $180 a month this winter. So that actually helps offset the new payment a bit.

When Refinancing Makes Sense

Dave told me refinancing isn’t always wrong. Just wrong for my situation. If I’d bought my house in 2018 at 6% interest, then refinancing to 7.2% would be stupid. But if rates had dropped to like 4.5%, then refinancing would be smart.

The home equity loan vs refinance thing totally depends on your current rate versus what’s available now. Got a low rate? Keep it no matter what. Got a high rate? Refinancing might actually save you money.

My neighbor refinanced last year. Her rate was 5.8% from 2016. Got it down to 4.9% and pulled cash for a kitchen. Her payment actually went down even with the cash out. That’s the perfect time to refinance.

What I’d Tell Someone Going Through This

First – don’t trust the first person you talk to if they’re pushing one option really hard. Michelle was so focused on refinancing she barely wanted to discuss home equity loans. Find someone who’ll show you both honestly.

Second – get your brother-in-law or whoever to help you understand the math. I needed Dave to break it down in regular language. All the banking terms just confused me more.

Third – look at the total interest you’ll pay. Not monthly payment. The home equity loan vs refinance comparison is completely different when you see what it costs over 10, 20, 30 years.

Fourth – know your current interest rate before you talk to anyone. That number is the most important thing. Mine was 2.95%, which is apparently amazing. If yours is low, you probably want a home equity loan. If it’s high, maybe refinancing helps.

Fifth – it’s okay to be stressed and confused about this. It’s a huge decision. I literally cried about it. Don’t feel dumb for not understanding right away. This stuff is complicated on purpose.

Two Years Later

I still have both mortgages. Still paying $1,875 total each month. Some months it’s annoying having two separate payments. But every month I’m glad I kept my 2.95% rate. That rate’s probably never coming back in my lifetime.

The home equity loan vs refinance question messed me up pretty bad emotionally. But I figured it out eventually with help. Made the right choice for our situation. Saved our family over $150,000 in the long run.

If you’re stressed about this decision – you should be. It’s a big deal. But you can figure it out. Get help from someone who actually knows this stuff and doesn’t benefit from your choice. Look at the real numbers over time. Don’t just focus on monthly payment.

And if you end up crying in a parking lot like I did, that’s okay too. At least you’ll be crying because you made a smart choice, not because you screwed up.

Disclaimer

The story shared above is for informational and educational purposes only and reflects one individual’s personal experience and opinions. It should not be taken as financial, legal, or mortgage advice. Every borrower’s situation is unique, and loan options, interest rates, and outcomes can vary based on credit history, income, lender policies, and market conditions.

Readers are encouraged to consult a licensed financial advisor, mortgage broker, or loan officer before making any decisions related to refinancing, home equity loans, or other financial products. The examples and figures mentioned are illustrative and may not represent current market rates or actual savings.

The author and publisher assume no responsibility or liability for any financial decisions made based on this content. Always verify terms, costs, and interest rates directly with your lender or financial institution.