Get Your Home Equity Through These Three Avenues

You’ve probably heard that one of the biggest benefits of buying a home is building your equity. You’ve also probably wondered what the heck that even is. Equity is the difference between what you owe on your mortgage and what your home is worth currently. It’s a form of forced savings that can work to your advantage as the value of your home appreciates.

There are a few ways to get and use your equity, and some have better benefits than others. 

Here’s our list of the 3 smartest ways for you to get yours:

Second Mortgage 

This type of home loan is the most structured, and the interest rate is usually fixed. The rate is considerably higher than the first mortgage, though. However, it’s often lower than that of a credit card, making it an appealing alternative for those with high-interest cards. These loans closely mirror a standard mortgage and are also known as a home equity loan. 

Home Equity Line of Credit (HELOC)

While this type of loan is typically the most flexible, it can be dangerous if you aren’t great at managing your money. You can draw on the line of credit when you need it with a check book or debit card. As you can guess, it means you have access to the funds in the same manner as a credit card. So, if you already have a few maxed-out cards, you probably want to run far away from this one.

Cash-out Refinance

This type of loan does not necessarily involve a second loan, but the costs associated can be very high in some cases. With this loan, you get cold, hard cash in exchange for taking on a larger mortgage. You’ll need to qualify for the new mortgage amount and most likely be viewed as a risky borrower to lenders. 

What You Need to Know

With equity on the rise, you may have more invested in your home than you realize. If you’ve been considering making a move – building a new home, paying off some debt, or retiring – it’s a great time to reach out to your mortgage team to learn how to put your equity to work for you.

-Kyle Green

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