Home Equity

One of the most popular reasons to take out home equity on your property is to make improvements to your home. Looking to remodel your kitchen? Adding a “catio” for your furry friends? Whatever improvements you want to make, home equity is an excellent funding source to do so.

If you’re facing the prospect of paying off large sums of debt, there may be a better way. Tapping into your home equity to repay outstanding debt can be an efficient and lower cost method of ridding yourself of credit card and other high-interest debt balances.

Career changes can be a terrific way to increase your household income and maximize your potential. If you’re considering going back to school to learn new skills, home equity can be used to fund your studies.

Life happens. Be it a medical emergency or the need to fly across the country to take care of a loved one, it’s always prudent to have funds available to deal with all the curveballs life can throw. Home equity can help.

Homeowners often hear about Home Equity Loans, Home Equity Lines of Credit (HELOC), and Cash Out Refinances when exploring ways to tap into their home’s value. While they all let you use your home equity, each one works a little differently.

A Home Equity Loan is a lump sum funding method built around a fixed rate, fixed term, and fixed payment amount. With this type of loan, you’ll begin making payments immediately, and your first mortgage’s monthly payment remains unchanged. It’s important to note that a home equity loan is considered a second mortgage and adds a second monthly payment independent from the first.

A HELOC, on the other hand, is an adjustable rate line of credit tied to the prime interest rate and may include an additional margin. Whenever the prime rate changes, your HELOC payment may also change. However, with a HELOC, you take out money as needed, and only make payments on the outstanding balance. In other words, if you don’t have a balance, you won’t be making payments.

A Cash Out Refinance replaces your existing mortgage with a new, larger one. You receive the difference between the two loan amounts in cash to use for whatever you’d like. Because it becomes your new first mortgage, you’ll continue to have only one monthly payment at a new interest rate and term, which may be higher or lower than your original mortgage, depending on current market rates.

It’s pretty easy to figure out your home’s equity. Get an estimate of your home’s value (from websites such as Redfin and Zillow) and subtract the amount left on your mortgage. To increase the equity in your home, follow these steps: 

• Make a large down payment when purchasing  
• Focus on paying off your mortgage faster than the repayment schedule
• Consistently pay more than the minimum
• Renovate as needed to increase your home’s value

Homeowners find significant benefits in being able to tap into their home equity to fund various expenses. From college and postgraduate education to home renovations and emergency funds, utilizing home equity can be an affordable way for many people to access money.

Any time you borrow money, it will impact your credit score. When you first apply, our team does what we call a “hard pull” on your credit to ensure that you can repay over time. This may or may not impact your credit score depending on many other factors within your credit history.

Increasing your total amount of debt can also impact your credit score.