What You Need to Know to Get Equity Out of Your Home
When you own a home, it is not a static thing. As you pay off your mortgage and as your property appreciates in value, all those things translate to equity, and equity translates to money. If there comes a day where you need to access some of that money, can you? Yes, you can, and here’s how you can do it.
Before Getting Started
Before you move forward, there are a few things that you should know. First of all, it is important to note that not all homeowners have enough equity to borrow from. It varies from lender to lender so it is worth shopping around, but generally speaking, lenders typically require that you have around 15-20 percent equity in your home before you can take out a loan on it.
A second point to consider before moving forward is that taking out an equity loan will lengthen the term of your mortgage. Which means that you will end up having to pay off your home for a longer period of time compared to your unaltered mortgage arrangement. Sometimes a home equity loan is known colloquially as a second mortgage, which is an apt name. So, make sure that you can afford to take on an additional payment.
Learn How Much Equity You Have Accrued
The first step you need to take is to meet with a mortgage lender. A mortgage lender will help you find out exactly how much equity your home has accrued. Additionally, a mortgage lender will be able to help you figure out exactly how much of that equity you can borrow. For the most part, you cannot borrow the entire amount, but you can borrow up to 85 percent of it.
What Your Options Are
Once you know the amount of equity you have and how much you can borrow, you can explore your financing options. There are three main financing options. One is a home equity loan. With a home equity loan, you will receive one lump sum that you can use as you wish and then you pay back that loan on top of your regular mortgage payments.
The next option you have is to take out a home equity line of credit. This option allows you to access the funds as needed. This can be useful especially if you do not know exactly how much of the money you will need. And if you do not end up needing the entire amount, you do not have to pay back as much.
And your final option is cash out refinancing. With this option you are taking out a brand-new mortgage and you pay off the old mortgage with the new one. And whatever the borrowed equity amount there is gets bundled into the new mortgage.
Being able to access the equity in your home when you need to cover emergency medical bills or when you need to remodel is a huge perk to homeownership. If you are not yet a homeowner because you are searching for the perfect place to call home, let DiCharry Homes help. From move-in ready homes to custom homes, we have something for you.
CATEGORIES: New Home Owner