Loan vs. Mortgage Refinance: Which is Better?

Personal loan vs. mortgage refinance

Refinancing can lower your mortgage rate or tap equity, but it comes with closing costs and a lien on your home. A personal loan is faster and unsecured but usually higher APR. Choose based on amount, speed, and whether you want to reset your mortgage.

Quick comparison

Feature	Personal loan	Mortgage refinance
Collateral	Unsecured	Home secures the loan
APR	Higher, fixed	Lower, often fixed (or adjustable)
Closing costs	Minimal	Higher (appraisal, title, fees)
Timeline	Fast funding	Slower; full underwriting
Term	2–7 years common	15–30 years common

When a personal loan makes sense

• You need a smaller amount and want fast, no-collateral funding.
• You do not want to restart or extend your mortgage term.
• Closing costs on a refinance would outweigh interest savings.

When a refinance is better

• You need a large amount and qualify for a much lower rate than personal loans offer.
• You plan to stay in the home long enough to recoup closing costs.
• You want to change your term (shorter to save interest, or longer to lower payment—knowing it may cost more over time).

How to decide

• Calculate break-even: closing costs ÷ monthly savings = months to recoup. If you may move sooner, a personal loan could be better.
• Match term to purpose: avoid 30-year debt for short-lived expenses.
• Compare after-tax cost; mortgage interest may be deductible in limited cases, personal loan interest is not.

FAQs (top questions)

Is a cash-out refinance cheaper than a personal loan?

For large amounts, usually yes on rate, but closing costs and longer terms can raise total cost. Run the math.

How fast can I fund each?

Personal loans: days. Refinance: weeks due to appraisal and underwriting.

Will refinancing reset my mortgage clock?

Yes, unless you choose a shorter term. Extending can lower payment but increase total interest.

Is my home at risk with a refinance?

Yes. Default can lead to foreclosure. Personal loans do not put your home at risk.

Are closing costs negotiable?

Some are. Shop lenders, ask for lender credits, and compare APR, not just rate.

Internal Links

• Compare personal vs. home equity if you want to tap equity.
• Review interest calculations to model total cost.
• Read loan terms to avoid before signing.

External resources

• CFPB on refinancing

Conclusion

Use a personal loan for smaller, fast, no-collateral needs. Refinance when you need more money at a lower rate and will stay long enough to recover closing costs—while accepting home collateral risk. Run the break-even and match term to the life of the expense.