How to Leverage Your Home to Finance a Loan
When you leverage your home to finance a loan, that means you use your home in order to qualify or get the loan. Most lenders--such as credit card lenders and those issuing personal loans--care more about your income and credit score than about your home, since it is unlikely you'll sell your house to make the payments. Therefore, if you want to leverage your home, you will have to guarantee the loan with the home. This is easiest to do if you actually take a loan on the home itself, such as a second mortgage or a home equity line of credit (HELOC).
Other People Are Reading
Instructions
-
-
1
Get your home appraised. You cannot leverage your home unless you have equity in it. That means that your home must be worth more than you owe on it, otherwise there is no value in the home to guarantee the new loan. An appraisal can help you determine how much equity, if any, you have and thus how much leverage you have.
-
2
Evaluate your options. You can get a second mortgage, which gives you cash out of your home. This loan can be issued as a home-equity line of credit which you can access only as you need it (sometime via a credit card) or as a single lump-sum payment second mortgage.
-
-
3
Research quotes online. It may be easiest to get your loan from the lender who already holds the mortgage on your house, since things such as title searches and bank appraisals may not be necessary if your lender already has the documents on file. However, you'll want to do research to see what rates are available to you before you decide on a lender.
-
4
Apply for a loan. Your home will act as collateral on this loan, so be careful. When leveraging your home to get a loan, if you do not pay, the lender can foreclose on your house even if you are current on your first mortgage. Make sure you have a careful plan in place to make the payments before putting your home at risk.
-
1
