Common & alternative ways to get equity out of your home

by Cheryl Pendenza - Realtor®/Broker Associate 06/06/2024

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Paying off credit card balances and consolidating debt are some of the most common ways homeowners use their home equity, but there are plenty of alternative ways to get equity out of your home. 

The longer you make payments on your mortgage, the more your equity grows - giving you more power to use that value to your advantage.

Here are some other great ways you can benefit from building equity:

Cash-out refinance

Cash out refinancing lets you use equity by getting a new mortgage. Essentially, you replace your current mortgage loan with a higher amount, and receive the difference in cash. The cash is tax-free and can be used for anything you need.

Home equity line of credit (HELOC)

A home equity line of credit or HELOC is a second mortgage with a credit amount you can draw from when needed. HELOCs are similar to credit cards in that you only pay for what you actually use until the designated draw period ends.

Home equity loans

A home equity loan is another second mortgage option, complete with a separate monthly payment. These loans often have higher interest rates than your initial mortgage, but use your home's equity as collateral.

Home equity loans & HELOCs are not the same thing

While similarly named, home equity loans and HELOCs function differently. With an equity loan, you get a lump sum of money at the beginning and make payments back over the life of the loan. A HELOC, by contrast, lets you draw whatever amount you need during a fixed period.

The key difference is with a loan, you'll have a regular monthly payment with a locked-in interest rate. With a HELOC, your payments and interest rates can vary.

When to avoid a home equity loan

When is it better to use a HELOC versus a loan? The important difference is flexibility. A HELOC allows you to pay for variable expenses and emergencies, and can be a great benefit for long-term costs like ongoing remodeling or renovation projects.

Consider all details of your financial situation when deciding how to use your home equity. Based on your goals and limitations, you can find the best possible way to benefit from your investment.

About the Author

Cheryl Pendenza - Realtor®/Broker Associate

Bringing more than 30 years of experience to the table, Cheryl has a paralegal degree, banking background, and is a member of many professional, civic, and community organizations.

Qualified • Experienced • Skilled

"As a full-time REALTOR®, I am dedicated to providing my clients with a high level of service by building relationships, marketing, and negotiating on their behalf. As a homeowner, I realize how important homeownership is.

Cheryl brings warmth and compassion to her client relationships and referrals have become the backbone of her business. "I’m grateful for every referral and welcome the opportunity to help clients achieve their real estate goals.”

Cheryl Pendenza, Broker Associate affiliated with RE/MAX Andrew Realty Services since 1999 is a local businesswoman and formidable negotiator who can help you achieve your real estate goals. Supporting family, community and local business is important to Cheryl and she can often be found at one of the local restaurants, shops, or galleries.