Different Options to Extract Equity From a Home

Equity is the difference between what your home is worth and what you owe on a mortgage or other home loan product. In most cases, you can get a home equity loan or line of credit once you have paid an amount equal to 20 percent of your home’s value. Depending on your needs, a home could be used as collateral for a hard money or personal loan.

Here Are Ways To Get Money From Equity In A Home

The Key Difference Between Equity Loans and Lines of Credit

A home equity loan functions much like a personal loan while a home equity line of credit (HELOC) functions more like a credit card. Both types of second mortgages generally require that a minimum monthly payment is made. With a line of credit, you replenish your credit limit with each payment that you make. It is important to note that consistently drawing down on a HELOC, you diminish the amount of equity currently in the property.

Use the Property As Collateral for a Personal or Hard Money Loan

If you don’t qualify for a second mortgage because of credit issues, a personal or hard money lender may still be interested in working with you. Personal loans are designed for people of all credit levels, and securing a personal loan with the title to a home could reduce your interest rate. Hard money loans generally come with high interest rates even with collateral, so be sure to borrow only what you need and can afford to repay. (For tips on how to win a home bidding war, click here.)

What About a Reverse Mortgage?

Reverse mortgages may be appropriate for older Americans who are looking for a convenient way to pay medical and other expenses in retirement. If you are interested in reverse mortgages in Las Vegas, a mortgage broker or loan officer may be able to shed some more light on how they work.