How to Get Equity Out of a House

Homes are long-term investments, and homeowners can tap into their equity to borrow money for any purpose. Equity is the difference between your mortgage balance and your property's value. There are many ways to get equity out of a house.

Instructions

1. Check your credit report. Your credit score determines the interest rate you'll receive to repay the money.

2. Get a home equity loan from a mortgage lender or broker. You can borrow a percentage of your equity, based on your income and credit history. You will receive the money as a lump sum. This creates a second mortgage on your property.

3. Apply for a home equity line of credit (HELOC). Also a second mortgage, a home equity line of credit is a revolving credit account from which you can withdraw funds. HELOCs typically feature a ten year withdrawal period.

4. Consider a cash-out refinance. A mortgage refinance creates a new mortgage, and you must submit a new home loan application. If approved, you can receive cash at closing. (A mortgage refinance increases your mortgage balance and monthly payment.)

5. Sell the property. Talk with a real estate agent and put your house on the market. Get a home appraisal before determining the price. After you find a buyer, use the proceeds to pay off your mortgage. If the sale price exceeds the mortgage balance, the lender will send you a check for the difference.

Resources

• Compare Loans on Lending Tree
• GMAC: What is Equity?