How to Leverage Your Home to Finance a Loan

Your home's equity can help you get additional loans.

Your home's equity can help you get additional loans.

When you utilize the financial tool of leverage, you create a debt to achieve another goal. If you need a loan for a specific purpose, such as an education or home improvements, one way to get the financing is by using the equity you’ve built in your home. This strategy isn’t for the timid, though, because a misstep could cause you to lose your home. Leverage your home to finance a loan carefully to make sure that you prepare for a positive outcome.

Hire a professional appraiser to appraise your home. The appraiser will inspect and evaluate your home thoroughly to assess the value.

Determine the equity you have in your home. Equity is the amount of your home’s value over the amount you still owe on your mortgage. The difference is your equity. A lender will zero in on this equity figure when determining whether you can leverage your home for financing.

Contact the lender with which you have your mortgage to explore the financing options available to you. Find out about the terms and interest rates for a loan. Contact two or three other lenders to get loan quotes to compare terms.

Fill out an application with the lender you wish to use. Submit the loan application along with the recent appraisal information and current mortgage data to the lender to use your home as leverage as well as any other information required by the lender. The lender will evaluate your credit scores, income and home equity to approve or reject your application. You should receive an answer about your financing within 60 days -- probably less.

Sign the loan paperwork after you receive approval. Make timely payments during the entire loan period to protect your assets.


  • Proceed very carefully when leveraging your home. If your financial circumstances change -- you lose your job or suffer a catastrophic illness -- and you don’t make payments on your loan, the lender can take your house to satisfy the loan.

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