Use your home equity
Home equity is your home's value minus what you owe. You can borrow against it to renovate, pay off higher-interest debt or cover a large expense. The main ways to do it are a cash-out refinance, a home equity line of credit (HELOC) and a home equity loan, and each works differently.
See how much cash you could take out
Answer a few quick questions and see which loans fit. A licensed loan officer confirms your options.
Ways to use your equity
How much equity you can use
Start with your home's value and subtract everything you owe on it. A home worth $900,000 with a $400,000 balance has $500,000 in equity. Lenders don't let you borrow all of it. For a cash-out refinance on a primary home, conventional and FHA loans generally cap the new loan at 80 percent of the home's value. In this example, 80 percent of $900,000 is $720,000, so you could take out up to about $320,000 before closing costs.
Limits for second mortgages, investment properties and other programs vary by lender. A loan officer can tell you what's available for your home.
Cash-out refinance
A cash-out refinance replaces your current mortgage with a new, larger one. You get the difference in cash at closing and keep a single mortgage payment.
It tends to make the most sense when the new rate is close to, or lower than, your current rate. If your current rate is much lower than today's rates, replacing the whole loan could raise the cost of the money you already borrowed, and a second mortgage may be cheaper overall.
HELOC and home equity loan
Both are second mortgages: you keep your current loan and add a second payment.
- A home equity line of credit (HELOC) works like a credit line secured by your home. You draw what you need, repay it and can draw again, up to a limit. HELOCs usually have adjustable rates, so the payment can change.
- A home equity loan pays you a lump sum up front, and you repay it over a set term. The rate may be fixed or adjustable.
Because your current first mortgage stays in place, these options can protect a low rate you already have. Ask your loan officer which second-mortgage options are available for your home and situation.
Using equity to pay off debt
Paying off credit cards or other high-interest debt with home equity can lower your monthly payments and total interest. It also changes the risk: debt that was unsecured becomes secured by your home, and if you can't make the payments, you could lose the home. The debt payoff calculator helps you compare paying debts down directly with consolidating them.
Reverse mortgages for homeowners 62 and older
A reverse mortgage lets homeowners 62 and older turn part of their equity into cash without a monthly mortgage payment. The loan grows over time and is usually repaid when the home is sold. The federally insured version is the Home Equity Conversion Mortgage (HECM). Our reverse mortgage explorer shows how one works, and the CFPB's reverse mortgage guide covers the rules and risks.
Common questions
Is a HELOC or a cash-out refinance better?
It depends mostly on your current rate. If you have a low rate you want to keep, a HELOC or home equity loan leaves your first mortgage alone. If today's rate is similar to or lower than your current rate, a cash-out refinance can give you one payment and often a fixed rate. A loan officer can compare the total cost of both.
How much cash can I take out of my home?
For a cash-out refinance on a primary home, conventional and FHA loans generally allow a new loan of up to 80 percent of the home's value. Subtract what you owe and closing costs to estimate your cash. Other programs and second mortgages have their own limits.
Can I take cash out of a rental property?
Yes. Conventional loans and DSCR loans can do cash-out refinances on investment properties, usually with lower limits than a primary home.
What are the risks of borrowing against my home?
Your home secures the loan, so missing payments can lead to foreclosure. Borrowing also reduces the equity you'd keep when you sell. Borrow for a clear purpose and make sure the payment fits your budget.