How to Cash Out Equity in Your Home

Before making a decision to borrow against your home do your research.

Before making a decision to borrow against your home do your research.

When you’re in the market to take equity out of your home, don’t take this lightly. There are many reasons why homeowners take out a second mortgage, for example to consolidate debt or make home improvements. However, before making a decision about a financing product, such as a home equity line of credit or loan, you should become familiar with the pros and cons of each.

How to Borrow Against the Equity in Your Home

Decide which type of financing product is right for you. Marie Sciarra, Branch Manager of Equity Source Home Loans, LLC in Pompton Lakes, NJ says ,“A home equity line of credit, also known as a HELOC, is typically good for homeowners who want a lower up-front variable interest rate and access to money at various times. However, home equity loans which are typically fixed rate loans are better suited to those who need a specific amount of money and payment stability.”

Research at least two lenders you want to do business with. Compare each lender’s interest rates and terms of the financing product that meet your needs. Many HELOCs require an interest only monthly payment. If you decide to apply for a HELOC, it’s critical for you to know how the lender will expect payment at the end of the draw period.

Check your credit to make sure you are creditworthy. Get a free copy of your credit report from each of the three major credit bureaus–Equifax, Experian and TransUnion. Log on to Annual Credit Report to request your reports.

Apply for a financing product with the lender that meets your needs.


  • Many of the costs of home equity financing products are similar to those you pay when you buy a home. Consider refinancing your loan and take cash out of your equity. This way, you will have only one monthly mortgage payment to make instead of two.
  • Shop for credit terms that best meet your borrowing needs without posing undue financial risks.
  • Read and understand the terms of your loan. If you apply for a HELOC, be clear on how the lender will expect for you to pay back the principal amount borrowed. Will the lender expect a balloon payment on a specific date? Or, will your payment be based on a loan amortization schedule?
  • Log on to The Federal Reserve Board’s website to learn more about home equity financing products.

Video of the Day

Brought to you by Sapling
Brought to you by Sapling

About the Author

Lathea Morris has been writing about personal finance and small business matters since 1998. She has been published in "Herald News NJ" and "NJ Assoc of Women Business Owners" magazine. She edited the book "A Prescription For Financial Health." Morris received from the University of Illinois a B.A. in sociology with a minor in business management. She is a recipient of the NJAWBO Communications Award.

Photo Credits

  • Jupiterimages/ Images