Home Equity Management Strategies


Whether you’re planning to renovate your home or want to buy a second one, home equity can be a good source of funding. Home equity is the part of your home that you own outright and thus have access to. By tapping into this pool of money, you can use it for almost any purpose, including paying down debt or making improvements on your property. Several methods exist to use your home’s equity beyond refinancing and selling.

One way is to take out an equity loan; another is through cash-out refinancing.

Both options allow you to access some or all of the value in your property without having to trade up (or down) in size or quality. Similar to an exchange option, this saves time and lets you keep more money in your pocket after purchasing furniture, appliances, and other household items that weren’t included in the sale price when selling an old house.


Let’s look at the process of taking out a home equity loan.

Home equity loans, also known as home equity lines of credit (HELOCs), allow you to tap into your home’s equity without selling or refinancing. With this option, you can take out a loan for any purpose—from paying off high-interest debt to funding renovations or consolidating other loans.
There are two main types of HELOCs: fixed-rate and variable rate. A fixed-rate HELOC gives you the same interest rate over the life of the loan; a variable rate option allows you to adjust your monthly payment based on changes in market rates.


  1. You can borrow more money than an unsecured personal loan because lenders are willing to accept more risk since they have collateral in case they need it (your house). This means higher limits and lower interest rates than most unsecured personal loans banks and credit unions offer.
  2. Unlike with an unsecured personal loan from one bank, there are no extra fees if someone applies for several different types of credit within a certain period of time (like getting an auto loan at one place and then applying for another car). The only fee charged is what’s listed on their website (typically around $100/$125), which covers all processing costs associated with obtaining approval through each lender involved—including those outside their network, such as Fannie Mae/Freddie Mac, if applicable!

A Home Equity Line of Credit (HELOC) works like a credit card; you can use it as much as you want and pay it back over time without penalty.
A Home Equity Line of Credit (HELOC) works like a credit card; you can use it as much as you want and pay it back over time without penalty. The interest rate on HELOCs is generally lower than the interest rate on home equity loans, which makes them more appealing to many homeowners. You may also be able to get a HELOC with a smaller amount down than a home equity loan or no money down at all.
A Home Equity Line of Credit (HELOC) is one way to access your home’s equity without selling your property. A HELOC allows you to borrow against the value of your home, giving you access to cash that can be used for any number of purposes—from paying off bills, shopping sprees, and vacations to renovating projects around the house.

Cash-out refinancing lets you access the money you have tied up in your home’s equity and turn it into cash.
Cash-out refinancing lets you access the money you have tied up in your home’s equity and turn it into cash. This can be a great option when rates are low, but some lenders may not allow this option if they think that it will negatively impact their ability to sell your home down the road.

How much can I get from cash-out refinancing?

This depends on several factors, including how much value is in your home, what type of loan (fixed-rate or adjustable), and which lender you choose. Generally speaking, homeowners can expect to receive between 70 percent and 80 percent of their appraised value for a standard mortgage refinance loan amount less than 80 percent of the property value (often called 80/20 loans). Suppose a homeowner is refinancing an adjustable-rate mortgage (ARM). In that case, you might receive only 60 percent or less, which could be due to limited equity due to rising monthly payments over time. However, most lenders require borrowers to have at least 20% equity before allowing them to access this option.

Home equity is a powerful tool for homeowners, but it’s not necessarily a free lunch. You can use your home’s equity to pay off debt or buy another property, but you should be aware of the interest rates and fees that come with these options. If you have any questions about what will work best for your situation, talk with a trusted mortgage company who can help guide you through the process.

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