If your home is worth more than what you owe on your mortgage, congratulations! You’re one of the lucky homeowners with equity. And, you have several ways to turn that equity into money that you can use for other things.
One way is to refinance your mortgage, increase the loan amount and take out the difference in cash. Another way to get a cash lump sum is to take out a second mortgage.
Or, you could get a home equity line of credit, or HELOC, which works more like a credit card, giving you a credit limit and a certain amount of time to withdraw the funds and a set amount of time to repay. If you’re 62 or older, you might consider a reverse mortgage, also known as a home equity conversion mortgage, or HECM.
Regardless of how you tap your home equity, it can give you great flexibility and provide opportunities you might not have otherwise. Here are some of the goals and dreams home equity can help you achieve.
The Bankrate Daily
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Finally, you can fix up your home!
One of the most popular ways to use home equity is to make repairs or improvements to your home. Just think — you won’t have to move to get the house you want! You can stay put and fulfill the vision you’ve had for your home.
Using equity to pay off other debt makes sense only if you don’t splurge with your newly zero-balanced credit cards or take out other new loans that you might not be able to afford.
Unlike other types of debt, equity loans are secured by your home. That means you could lose your house if you don’t make the payments.
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Pay for schooling
Home equity might pay for tuition and other educational expenses, saving your family from taking out student loans, personal loans or using credit cards for college costs. Home equity loans often have lower interest rates than other types of borrowing.
You can use your equity to pay for your education or your children’s education. Just be sure you aren’t putting your own financial future at risk by helping them.