Tap into Your Home’s Equity

Dated: December 7 2021

Views: 89

Your home is a valuable asset. Does it make sense to harness that value? Homeowners continue to refinance their mortgages to take advantage of low-interest rates, while others are tapping the equity in their homes to pay for home improvements or necessities during hard times. Whether tapping your home equity makes sense for you depends on your circumstances, your ability to keep up with payments, and the amount of equity in your home.


Equity is the difference between what you owe on your mortgage and what your home is worth. You build equity every month when you make monthly mortgage payments and when the market value of your home increases. Some home improvements also may help you build equity. You have three main options for tapping your home’s equity. In each case, your home serves as collateral for the loan, which means that if you don’t make payments, you risk losing your home.


Three ways to tap your home’s equity


1. Home equity line of credit, also known as HELOC, is similar to a credit card in that you have a limit on what you can borrow, and you pay interest only on the amount that you borrow. The interest rate on the HELOC adjusts periodically, and you have to pay it back in full at the end of a predetermined time. A HELOC is a type of second mortgage.


2. Home equity loan. Less common than HELOCs, loans allow you to borrow a lump sum at once and pay a fixed interest on that amount over a set period of time. A home equity loan is also a type of second mortgage.

3. Cash-out refinance. With this option, you get a new mortgage for more than the unpaid principal balance on your old loan. You use it to pay off your old mortgage, and then have additional money left over for other expenses.

If you are thinking of tapping into your home's equity, talk to a mortgage specialist to get more information on the options listed above.

Blog author image

Holly Montilla

Holly understands that buying or selling a home is more than just a transaction: it's a life-changing experience. That's why her team of highly-seasoned real estate professionals is dedicated to provi....

Latest Blog Posts

How to Make Your BEST Offer on a Home

Making the right offer is crucial when you have your eye on a home.  Offer too little, and you may get passed over for the next buyer. Offer too much, and you may need to reevaluate your budget

Read More

What Can a Landlord Deduct From Your Deposit?

Maybe you didn’t think twice when you put a big security deposit on that fancy apartment two summers ago. But now that you’re getting ready to move again, you might be wondering how much

Read More

6 Mortgage Tips for Single Parents

If you’re a single parent, it’s arguably more challenging to buy a home than for those in a partnership with dual incomes. Yet it’s easy to see why so many single parents are eager

Read More

6 Tips for Buying in a Competitive Market

The housing market is hot. On fire, actually—and it doesn’t seem to be dying anytime soon. This can be scary because of how tough it is to buy a home in a competitive market. 1. Do

Read More