-
Compare Offers Instantly
-
Get Funds Faster
-
Close Where Convenient
​
What is Home Equity? How to Access the Wealth In Your Home
Key takeaways:
​
-
Home equity is the portion of your mortgage loan that you’ve already paid off.
-
A cash-out refinance replaces your current mortgage with a larger one, receiving the difference in cash for things like debt consolidation or home renovations.
-
Home Equity Loans provide a lump sum with a fixed payment plan, while Home Equity Lines of Credit offer flexible, revolving access to funds.
PEACE OF MIND Home equity is the portion of your home's value that you own outright, or the amount of your mortgage loan that you’ve already paid off. As a homeowner, you've likely spent years making mortgage payments and perhaps even seeing your property value increase. This home equity you’ve built can be a powerful financial asset. Many homeowners don't fully realize how to use their home equity. Your home is more than just a place to live; it's a significant financial tool that can help you achieve a variety of goals, from tackling debt to funding major life events. If you've been wondering how to access your home’s equity, here are three ways you can tap into it:
What is a Cash-Out Refinance?
What is a Cash-Out Refinance? A cash-out refinance is a way to restructure your current mortgage while simultaneously receiving a portion of your home's equity in cash. With this, you replace your existing mortgage with a new, larger one, and the difference between your old mortgage balance and the new loan amount is given to you in cash at closing. This strategy is often used to: Consolidate high-interest debt: Pay off credit cards, personal loans, or student loans with potentially lower interest rates from your mortgage. Fund major home renovations: Update your kitchen, add a room, or make other improvements that can further increase your home's value. Cover significant expenses: Whether it's college tuition, a major medical bill, or another large financial need, a cash-out refinance is a great option for covering large upfront costs. It’s a popular option for homeowners looking to access a substantial lump sum from their equity.
What is a reverse mortgage?
A Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage, is a special type of home loan only for homeowners who are 62 and older.
How does a reverse mortgage get paid back?
With a reverse mortgage loan, the amount the homeowner owes to the lender goes up–not down–over time. This is because interest and fees are added to the loan balance each month. As your loan balance increases, your home equity decreases.
A reverse mortgage loan is not free money. It is a loan where borrowed money + interest + fees each month = rising loan balance. The homeowners or their heirs will eventually have to pay back the loan, usually by selling the home.