Leverage Home Equity for Cash

By Caitlin in Posts
Leverage Home Equity for Cash

If you have a mortgage but are in need of more cash, you can leverage your home equity to get the money you want.

When you first receive your mortgage, your loan is secured by a portion of the equity of your home (up to 95%). That means that your lender has a 95% stake in the property you bought. As you pay off your mortgage, your equity in the home increases. That means that you can take out another loan on the portion of the home equity that you own. This means that you would be paying two loans instead of one.

In what situations should I obtain some form of a home equity loan?

If you need money for…

– Home renovations
– Home improvements or extensions
– A new car
– To cover your children’s school expenses
– A vacation
– For your business

Then this type of loan is ideal for you. Basically, if you need a large lump sum of cash for whatever the reason, you can get it by obtaining a loan on the equity of your home.

What types of home equity loans are available to me?

The two most popular forms of financing your home equity are home equity lines of credit and second mortgages (take a look at a comparison).

A home equity line of credit, also known as a HELOC, works a lot like a credit card. You have a credit limit of say, $30,000, and you can borrow against that amount as you wish. If you pay back what you owe, you can borrow against your line during the term of your loan. Basically so long as credit is available you have the option of using it until your term comes to an end.

A second mortgage is a little different. You can read up on second mortgages in detail here (we have a lot of other mortgage learning resources as well). To summarize what this type of loan is all about, a second mortgage is a loan taken out against your home while a first mortgage is already in place. Because a second mortgage is second in priority in case of default, it often comes with higher rates than their counterparts.

Can’t I just use my credit card?

You most definitely can, if your credit score and credit limits are both high enough. But we strongly recommend you don’t.


Credit cards have ridiculously high interest rates compared to mortgages and home equity loans. Today, you can get a mortgage with a 5 year term for 2.99%. A credit card’s annual percentage rate can exceed 20%. It’s a no brainer!

Can I just refinance instead?

You can refinance your mortgage instead, and considering how low mortgage rates are these days that’s definitely not a bad idea. There might be a cost to breaking your current mortgage, but often those costs are negated by the long term savings you could potentially benefit from.

In conclusion, to get the cash you need you can obtain a home equity line of credit, a second mortgage or you can refinance your current mortgage.

Do you still want more information?


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