Leverage Your Home Equity
Several financing options allow you to withdraw cash from your home equity, including a HELOC, fixed-rate home equity loan, cash-out refinance, and reverse mortgage. Cash-out refinancing permits access to home equity through the first mortgage as opposed to the second mortgage, such as with a home equity loan or a home equity line of credit. Homeowners with good credit who can afford a second monthly payment in addition to their mortgage payments are the best candidates for home equity loans.
With all this additional equity, many homeowners can access the cash they need without selling their homes or taking out expensive personal loans. Additionally, home equity loans, home equity lines of credit (HELOCs), and home equity investments allow you to convert this equity into cash — without modifying the terms of your original mortgage.
Unlike lump-sum, one-time payments received with a home equity loan, HELOCs, or Home Equity Lines of Credit, function like credit cards because HELOCs permit you to access and use the equity at your discretion — up to a specified limit and over a specified period.
Lenders impose a limit on how much they will lend (usually 80% to 85% of the available equity), so the loan or refinance makes more sense if you have paid off a substantial portion of the mortgage or if the home’s value has increased. When you have little equity in your home, a personal loan may be a useful short-term solution for renovations. However, the planned improvements will significantly increase your home’s value.
Cash-out refinancing is when you use the equity in your home to borrow more than is owed on your existing mortgage, and you receive the difference in cash, which you can then use to obtain financing for large expenses such as home improvement projects, medical bills, college tuition, and more. Contact us to learn how you can tap into your homes equity.