close popup Privacy policy
Home > Home Equity > Your Options

Your Options

As the debt of a homeowner’s mortgage gets paid down, and the borrower begins to own more of their home, they may begin to accrue equity.

Equity is a concept that relates directly to the difference between the home's fair market value and the outstanding balance of all liens on the property.

There is no ATM hidden in the basement of each house for the owners to directly withdraw from their equity. But there are options...

While this may sound similar to the loan-to-value ratio, equity speaks more to the specific dollar amount as opposed to just a percentage. But it’s important to remember that equity by itself is not a liquid currency. There is no ATM hidden in the basement of each house for the owners to directly withdraw from their equity. But there are options through various forms of home equity management that the homeowner may be able to unlock that monetary value that their accrued equity represents.

It should be noted that equity can go both ways. The value of a home is dependent on many external valuables including a fluctuating housing market, so it’s not impossible for a home to lose equity through no fault of the homeowner.

There are a quite a few ways for the homeowner to access the equity of their property, just a few of which are discussed here. For example, cash-out refinancing allows for the borrower to potentially extract money from their equity while they refinance their entire mortgage. A homeowner could also decide to put their house on the market as an attempt to net the accrued equity in cash.

There are also options that may be available to the homeowner that don’t require the often cumbersome task of moving or refinancing. The first option is a home equity loan.

A home equity loan consists of a one-time lump sum loan and generally includes fixed-rate interest protecting the borrower from market fluctuations during repayment. This form of equity loan could be great for some with one-time expenses like a new car or home repair.

Another potential route for the homeowner to tap their equity is through a Home Equity Line Of Credit or HELOC for short. This is an ongoing line of credit that remains open through a permitted draw period. Generally the draw period for most HELOCs is 10 years. During that draw period the home owner can draw from this fund using checks and a card that functions similarly to a credit card up to the maximum limit of the line of credit agreed upon at the outset.

The HELOC offers a few variations on repayment. The borrower could make interest-only payments during the draw period then pay interest and principal during the repayment period. The repayment period is generally 15 years but can vary depending on the agreed upon terms established by lender and borrower. Generally a HELOC comes with a variable interest rate, although some lenders do offer the potential of rolling the sum into a fixed-rate repayment plan.

While both the home equity loan and HELOC offer potentially great solutions to tap into the equity of a homeowner’s investment, it is important for each borrower to decide which option works best for their specific needs and financial situation.

mail print
Find Lenders

Try our Mortgage and Refinance calculators See your options now

Most popular

Home affordibility calculator is ready to use!

See your options now


The operator of this website is not a lender or loan provider, and is not an agent, representative or broker. This website does not constitute an offer or solicitation to lend and the information submitted by you is not an application for mortgage financing. The information submitted by you will be shared with up to five (5) participating lenders. The operator does not guarantee you will be connected with participating lenders, receive conditional loan offers or enter into a loan agreement. The operator does not endorse, recommend or guarantee the price, product, availability, rates or fees of participating lenders. Participating lenders may perform credit checks with credit reporting bureaus or obtain consumer reports through alternative providers. Participating lenders may require you to pay a fee to cover the costs of any such inquiry. Participating lenders may not offer all loan products and loan products may not be available in all states. The states serviced by this website may change from time to time, without notice. The operator is not affiliated with the government and this service is not endorsed or sponsored by the government or any participating lender. This service is void where prohibited. This website is not an independent consumer protection update and the content provided hereon is for informational purposes only. Please see the Privacy Policy, Terms of Use and Material Disclosures for more information. Consult with your independent legal and financial advisor before acting on any information provided on this website.

© 2018 All rights reserved.