Refinancing requires you to break your mortgage term early and consolidate your mortgage and other debts into one loan of up to 80% of your home’s value (otherwise known as the LTV, Loan-to-Value ratio). Since you are breaking a contract, you will incur a penalty. The penalty can range from three months’ interest with a variable mortgage to a more significant interest rate differential penalty with a fixed mortgage.

A HELOC is a line of credit backed by your home. It allows you to access up to 80% of your home’s value, minus whatever outstanding mortgage balance you currently have. All HELOCs are variable mortgage rates and come with a slightly higher interest rate than a traditional 5-year variable mortgage rate.

As a HELOC is a line of credit, you are not advanced all of the funds at once. HELOCs give you the flexibility to access as much or as little equity as you wish. In addition, HELOCs do not require you to pay down a portion of the loan principle each month. Instead, your minimum monthly payment is an interest-only payment based on the amount you have withdrawn.

The last debt consolidation option, a second mortgage, is often accompanied by a very high interest rate. Though second mortgages are not offered by all lenders, they do allow you to access more than 80% of your home’s value. If you are finding it difficult to qualify for a larger loan with your existing lender, then a second mortgage may be worthwhile. While second mortgages do come with higher mortgage interest rates, these rates are still usually lower than those of credit cards and personal lines of credit.