Check your home equity loan options. Start here
If you’ve owned your home for a few years, there’s a good chance you’ve built up a solid chunk of equity, maybe more than you realize. Thanks to rising home prices and the steady chipping away at mortgage balances, the average homeowner now has just over $300,000 in equity, according to Cotality. That’s a big jump from just a few years ago.
Whether you’re planning a major remodel or looking to tackle high-interest debt, tapping your equity can open up financial opportunities. Let’s break down the most common (and practical) ways to take equity out of your home and put it to good use.
There are several common and effective ways to tap into your home’s value, each designed to fit different financial needs and situations. Let’s explore the three main options for unlocking your home equity and turning it into cash or credit.
A HELOC works like a revolving line of credit secured by your home. You can borrow funds up to a credit limit, repay, and borrow again during the draw period (usually 5-10 years). HELOCs typically have variable interest rates, often lower than credit cards or personal loans, but rates can fluctuate over time.
Real-life use case: A homeowner might use a HELOC to cover ongoing costs of a home renovation — borrowing only as expenses come up.
Pros: Flexible access to funds, interest-only payments possible during draw period, generally lower rates than unsecured loans.
Cons: Variable rates can increase, your home is collateral, and payments may rise after the draw period ends.
Check your HELOC options. Start here
Sometimes called a second mortgage, a home equity loan provides a lump sum at a fixed interest rate with fixed monthly payments over a set term. It’s ideal if you want a predictable payment and a known payoff date.
Real-life use case: Someone might take out a $40,000 home equity loan to pay off high-interest credit cards and lock in a lower fixed rate.
Pros: Fixed interest rate and payments, good for one-time expenses.
Cons: Adds a separate loan payment, uses your home as collateral, and fees may apply.
Check your home equity loan options. Start here
This option replaces your existing mortgage with a new, larger loan, and you receive the difference in cash. Cash-out refinances typically allow you to borrow up to 80% of your home’s value, depending on lender guidelines.
Real-life use case: A couple might refinance their mortgage and pull $50,000 in equity to help fund their child’s college tuition.
Pros: Potentially lower interest rates compared to other options, consolidates mortgage and cash-out loan into one payment.
Cons: Closing costs and fees, possibly extending the loan term and total interest paid, requires credit approval.
Verify your cash-out refinance eligibility. Start here
In some situations, lesser-known tools like home equity agreements (HEAs) or reverse mortgages (for those 62+) might be worth exploring. These aren’t as common, but they could be a fit depending on your age, financial goals, and repayment needs.
With homeowners holding record amounts of equity, now is an opportune time to consider how you might leverage this valuable asset. Whether you’re planning a remodel, consolidating debt, or funding a major expense, tapping into your home equity can be a smart financial move, as long as it’s done thoughtfully.
If you’re curious about how to get equity out of your home without refinancing, explore a deeper dive with these 4 alternatives to cash-out refinancing.
To get started, connect with your lender or a financial advisor to understand your current equity position and explore the home equity options available to you.
