Building equity is one of the biggest benefits of homeownership. Home equity is the difference between how much you owe on your mortgage & how much your home is worth. As you pay down your mortgage each month & as the value of your home increases over time, you’ll start to build equity!
When you sell a home in which you have equity, a chunk will go towards closing costs & the rest will be yours to keep.
But selling your home isn’t the only way to tap into home equity! Here are three of the most common ways to get equity out of your home without selling:
Cash out refinance
A cash out refinance replaces your existing home loan with a larger mortgage loan (by using the bigger loan to pay off your old one). The difference between the balance on your previous mortgage & your new mortgage amount is how you’ll be able to access home equity & essentially “cash out ”.
Home equity line of credit
A HELOC (short for a home equity line of credit) is a way to borrow against the available equity in your home whenever you want (up to a set limit) while making low payments. With a HELOC, the house is used as collateral for the line of credit. Similar to a credit card, a HELOC gives you the flexibility to borrow against your home equity, repay, & repeat. Most HELOCs allow up to 10 years to withdraw funds, & up to 20 years to repay.
Home equity loan
A home equity loan is a type of mortgage that allows you to borrow money using the equity in your home as collateral. With a home equity loan, you’ll get access to a lump sum of money all at once & will repay the home equity loan (with principal and interest) each month at a fixed rate over 5-30 years. Keep in mind, that a home equity loan is considered to be a second mortgage, so you’ll have to make monthly payments for your home equity loan in addition to paying your current mortgage each month.
Have questions about home equity? I’d love to chat with you & help connect you with a local lender — send me a DM & I’ll be in touch!
Dawn Forkenbrock, Arizona Realtor
Real Broker 🌵
🌐 theforkenbrockgroup.com
📱 Call/text: 480.220.0215
📨 dawn@dawnsellsazhomes.com
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