Need Money? Equity May Be the Answer

As a homeowner, your equity is your secret weapon. With every mortgage payment you make, your stake in the home grows — and so does your equity.

When your equity stake is large enough, it can be used to improve your financial standing. Tap into it to pay off debts, use it to cover home improvement costs or, most importantly, consider it a safety net in case of emergency.

Have you been paying down your current mortgage for some time? Then you probably have equity to tap. So what can you do with it?

• Home Equity Loan: This is a loan you take out in addition to your existing mortgage. It lets you borrow against your stake in the home in exchange for a lump-sum, one-time payment. 
  
  Often, you’re able to borrow up to 85% of your home’s appraised value, minus what you owe. Many homeowners use these for large expenses like tuition, medical bills or the down payment on an additional property.
  
  
• Home Equity Line of Credit (HELOC): HELOCs work like credit cards, only without the sky-high interest rates. The equity in your home is used to create a line of credit that you draw from as needed. 
  
  HELOCs typically come with long draw periods (think decades) and are often used for ongoing expenses, like regular home improvements or maintenance. This method should allow you to borrow 75% to 80% of your home’s appraised value, minus what you still owe.
  
  
• Cash-Out Refinance: Refinancing essentially replaces your existing mortgage loan. You take out a new loan larger than the balance on your current one, and then keep the difference in cash to cover whatever expenses you’re facing. 
  
  You can typically borrow up to 80% of your equity with a cash-out refi. Some homeowners use the money to pay off debts or high-balance credit