How to take cash out of your home

Homeownership provides shelter, stability and a sense of pride, and it can also serve as a valuable financial asset. If you find yourself in need of extra funds, tapping into your home equity can be an attractive option. Today, homeowners who want to access their equity without refinancing their mortgage and giving up a low rate on their current loan have two common options: a home equity line of credit or a home equity loan. In this post, we will explore the ins and outs of these mortgage strategies to help you decide if one is right for you.

Understanding Home Equity

First, it’s important to know what home equity means. Home equity refers to the portion of your property that you truly own, calculated by subtracting your current mortgage balance from your home’s current market value. For example, if your home is valued at $400,000 and you owe $200,000 on your mortgage, your equity would be $200,000.

Typically, a well-qualified homeowner can borrow up to about 90% of their home’s value. Therefore, if you had $200,000 in equity in a $400,000 home, you might expect to qualify to take out up to $160,000 in equity as cash. This limit, known as a loan-to-value limit, is subject to change and may vary based on factors such as your credit score and property details.

Home Equity Line of Credit (HELOC)

A HELOC is a revolving line of credit that allows you to borrow against the equity in your home. It functions similarly to a credit card, offering you a set credit limit that you can draw from as needed. Here are the key features of a HELOC:

Home Equity Loan (HELOAN)

Also known as a second mortgage, a home equity loan involves borrowing a lump sum of money against your home equity. Unlike a HELOC, a home equity loan provides a one-time payout and typically offers a fixed interest rate and predetermined repayment terms. Here are the key features of a HELOAN:

Popular Uses for Home Equity Funds

The funds you receive from your home equity can be spent on anything without restriction. Many homeowners use their funds for one or more of these purposes:

Deciding on a HELOC or a HELOAN

Which method of tapping your home equity you choose depends on your personal needs and preferences. If you want access to a flexible line of credit for ongoing or unpredictable expenses, and you’re willing to accept some risk with a variable interest rate, a HELOC may be right for you. If you need a lump sum for a home renovation, debt consolidation or other set expense, and you want the predictability of a fixed rate, a HELOAN may be right for you.

Whichever option you choose, it’s important to understand the added expenses that come with your borrowed funds. Your monthly HELOC or HELOAN payments will be in addition to the payments on your primary mortgage, and upfront closing costs may also be required.

Be aware that the state where your home is located may have restrictions on if, when and how you can take cash out of your home.


If you’re interested in converting some of your equity into cash, a mortgage consultation is a recommended first step. This can show you how much cash you can expect to take out, what programs are available to you and how your options compare. To request a free mortgage consultation, please get in touch today.