How to Leverage Real Estate Equity

Some homeowners turn to the equity they have built up in their home as leverage for other purposes. Some of the common ways homeowners leverage their equity funds is by obtaining a home equity loan. A home equity loan allows homeowners to pull out the equity they have built in the home, which is the difference between the current value of the home and the balance of their existing mortgage.

Things You'll Need

• Mortgage statement for existing mortgage
• Equity loan application
• Last two years tax returns
• Last two months bank and brokerage statements
• Calculator
• Local real estate sales listings
• Last two months pay stubs

Instructions

1. Make sure you have equity in your home. Look in a local publication that has homes listed for sale to see how much comparable homes in your neighborhood and community are selling for. Subtract you current mortgage balance from this figure to see if you have any equity.

2. Gather interest rate and cost information. Contact your current mortgage company and inquire about obtaining an equity loan. Be sure to find out what the interest rate is for the loan and if there are any costs associated with establishing an equity loan.

3. Compare other lenders. Contact at least two other lenders to see what interest rate and costs they charge for an equity loan.

4. Submit an application to the lender of your choice when you are ready to establish the equity loan.

5. Supply supporting documentation. Submit a copy of your current mortgage statement, a copy of your last two years' tax returns, two recent pay stubs, and copies of the last two months of your bank and/or brokerage account statements.

6. Attend the closing once you've been approved for the equity loan. Sign the promissory note for repayment of the equity loan and agree to the terms and conditions set by the equity lender.

References

• Bank Rate