How to Get Equity Out of Your Home Without Refinancing

2 Ways to Access Home Equity Without Refinancing

Here are more details about the three common ways to access equity without refinancing.

1. Home Equity Line of Credit (HELOC)

A traditional home equity line of credit gives you access to a line of credit you can draw from as needed. During the draw period, you can borrow as much or as little as you want up to the maximum credit limit.

This is a revolving line of credit that works similarly to credit cards but usually at a lower interest rate. You'll make payments on interest as you borrow, and HELOCs usually have variable interest rates. Then you move into a repayment period when you pay both principal and interest.

Freedom Mortgage's HELOC is a bit different as you get a lump sum payment up front, and you make principal and interest payments right away. However, as you repay your debt, you can borrow again during the draw period. This offers borrowers flexibility.

HELOCs can be good options for those who want the option to borrow repeatedly over time as their financial needs change. However, if your rate is variable, you face the risk of rates rising.

2. Home Equity Loan

A home equity loan allows you to borrow a lump sum which you receive up front. You will usually have a fixed interest rate and will repay your loan with steady monthly payments over the repayment term.

Home equity loans are similar to your first mortgage, although your first mortgage is not affected when you borrow this way.

You cannot borrow again from this loan once you get your lump sum payment, and you pay both principal and interest from the start. If you want more certainty and just need one lump sum payment, this can be a good borrowing solution.

Choosing the Best Way to Access Your Home Equity

You should carefully evaluate all options when you decide to access home equity. Some things to consider include:

• Do you need a lump sum upfront or do you want to borrow as needed over time? A home equity loan provides an upfront lump sum, while a traditional HELOC offers the option to borrow over time. Freedom Mortgage's HELOC offers both.
• Do you want a fixed or variable rate option? Home equity loans and Freedom Mortgage's HELOC offer fixed rate options, while traditional HELOCs are more likely to have variable rates.

Whichever option you select, be sure you understand interest rates, fees, and monthly payments before borrowing.

Getting Your Home Equity Without Refinancing FAQs

Still need to know more? Here are the answers to frequently asked questions about accessing home equity without refinancing.

What Are the Risks of Tapping Your Equity?

The biggest risk of tapping your equity is that you could end up upside down on your loan, or owing more than your home is worth. If you refinance your current loan to access equity, you could also lose your low interest rate and make the repayment period longer.What Is the Cheapest Way to Get Equity Out of Your House?

The cheapest way to get equity out of your house varies depending on if you’re looking at upfront or long-term costs.

• If you want the lowest rate, a cash out refinance loan might offer a lower rate than a home equity loan or line of credit. However, if current market rates are higher than your existing rate, you could make your existing loan more expensive and raise borrowing costs over time.
• A HELOC, on the other hand, could come with lower closing costs than other options, or even no closing costs depending on the lender and loan terms. However, the interest rate may be higher over time than a cash out refinance loan, and the rate is often variable, so you risk rates and payments rising.

Are There Other Ways to Access Home Equity Without Refinancing?

There are also companies that offer a home equity agreement or home equity investment, which means they invest in your home by giving you a lump sum of money, and they get to share in future home appreciation. These options can allow you to borrow without monthly payments, but there may be fees and other risks, and you must give up a portion of the profits when you sell your house. These arrangements can vary so it’s important to understand all of the terms and risks when exploring this option.

Is a HELOC Better Than Refinancing?

When you compare a HELOC vs. a cash out refinance, you need to consider the pros and cons of each. A HELOC might be a good option if you want to access equity without affecting your current loan rate. Refinancing could be the right choice if you want to change the loan terms of your current mortgage and access equity.

Final Thoughts: You Can Tap Your Home Equity Without Refinancing

Tapping your home equity without refinancing is definitely possible. You just need to explore the different loan options and find the one that's right for you. Reach out to Freedom Mortgage today to learn about cash out refinance loans and our HELOC to see which option makes sense.

Freedom Mortgage Corporation is not a financial advisor. The ideas outlined above are for informational purposes only, are not intended as investment or financial advice, and should not be construed as such.

This is not an offer or a commitment to lend. Freedom Mortgage Corporation is not, nor is it affiliated with, any governmental agency or organization. Loans are subject to eligibility, credit approval and property requirements.