Discover Alternative Ways to Get Equity Out of Your Home

Exploring alternative ways to get equity out of your home can involve various forms of refinancing, like a reverse mortgage or a home equity loan.


alternative ways to get equity out of your home

When you need cash and don’t know where to look, one of the best places to find value is in the most valuable thing you own, your home. You can access the equity you have in your home without selling your home. There are alternative ways to get equity out of your home, and it can be a great strategy, especially if your home’s value has risen.

Still, just because it can be a great strategy doesn’t mean it always is. Having equity in your home gives you choices and opportunities, but making the right choice is entirely up to you. There are a variety of ways to access the equity in your home, and any one of them (or none of them) could be the best option for you.

Depending on what you need money for and how much equity you have, any of the following could be a great strategy.

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Consider alternative ways to get equity out of your home like cash-out refinancing

A cash-out refinance can be an excellent strategy for a savvy investor or somebody looking for equity in their home. This strategy refinances your home and allows you to take a portion of the refinance in cash.

For example, if you have a balance of $100,000 remaining on your mortgage, you could refinance $150,000 and take $50,000 in cash. But, this only works if, after the refinance, you will still have 20% in equity remaining in your home so you’ll avoid PMI. You cannot do a cash-out refinance for the total value of the property.

Use alternative ways to get equity out of your home, like a home equity loan

A home equity loan can be a great way to gain money at a low-interest rate. Most other types of loans will land you with a much higher interest rate, while home equity loans will usually give you a rate that looks more like an initial mortgage. Similar to a cash-out refinance, with most lenders, you need to still have a minimum of 20% equity in your home after the home equity loan.

Home equity loans put a second lien on your property, which gives another lender new claims to your home if you ever fail to make payments. While this is a great way to get a low-interest loan, exercise the strategy with caution and make sure you don’t put yourself in a situation where you struggle to make payments.

Know alternative ways to get equity out of your home with a reverse mortgage

The reverse mortgage received a lot of bad press as a scam because older individuals were misled into misusing the strategy. A reverse mortgage is a technique where no loan payments are required. Instead of making loan payments on a property or mortgage, a lending company will make payments to the homeowner.

Essentially, this works as if the lending company was repurchasing the house from the owner. The federal government backs quality reverse mortgages, but there are scams that equity seekers should be aware of.

The idea around a reverse mortgage is that the amount of money owed will never exceed the value of the home itself. This could happen in some scenarios (usually if the home’s value drops), but the point is to have the home pay off the remaining balance when money is no longer needed (for example, at death). This is why reverse mortgages are for people over 62. Exercise this strategy with caution as the result is usually that you no longer own your home.

Why are you looking to take equity out of your home? Do any of these strategies seem right for you? Why?

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