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3 Ways To Tap Into Home Equity (Without Selling)

Building equity is one of the biggest benefits of homeownership. Home equity is the difference between how much you owe on your mortgage and how much your home is worth. As you pay down your mortgage each month and as the value of your home increases over time, you’ll start to build equity!

When you sell a home in which you have equity, a chunk will go towards closing costs and the rest will be yours to keep.

But selling your home isn’t the only way to tap into home equity! Here are three of the most common ways to get equity out of your home without selling:

1. Cash-out refinance

A cash-out refinance replaces your existing home loan with a larger mortgage loan (by using the bigger loan to pay off your old one). The difference between the balance on your previous mortgage and your new mortgage amount and is how you’ll be able to access home equity and essentially “cash-out”.

2. Home equity line of credit

A HELOC (short for home equity line of credit) is a way to borrow against the available equity in your home whenever you want (up to a set limit) while making low payments. With a HELOC, the house is used as collateral for the line of credit. Similar to a credit card, a HELOC gives you the flexibility to borrow against your home equity, repay, and repeat. Most HELOCS allow up to 10 years to withdraw funds, and up to 20 years to repay.

3. Home equity loan

A home equity loan is a type of mortgage that allows you to borrow money using the equity in your home as collateral. With a home equity loan, you’ll get access to a lump sum of money all at once and will repay the home equity loan (with principal and interest) each month at a fixed rate over 5-30 years. Keep in mind, a home equity loan is considered to be a second mortgage, so you’ll have to make monthly payments for your home equity loan in addition to paying your current mortgage each month.

Photo By: Holly McMurter


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