Equity is the difference between the market value of your Columbus home, and what you owe on it. As you pay down your mortgage and your home’s market value improves, your equity can reach an impressive sum! If you find yourself in need of cash, borrowing against your home equity can be an attractive solution. Here are a few ways you can borrow against your home value without selling – and some considerations to keep in mind!

1. Home Equity Loan

A home equity loan allows you to borrow a lump sum of money against the equity in your home. This type of loan usually comes with a fixed interest rate and a set repayment schedule. It’s often referred to as a second mortgage. Your original mortgage would not be affected.

2. Home Equity Line of Credit (HELOC)

A HELOC functions more like a credit card. Instead of receiving a lump sum, you’re given a line of credit based on your home equity. You can draw from this line of credit as needed, and you only pay interest on the amount you borrow. HELOCs typically have variable interest rates, but they are generally more attractive than credit card or unsecured loan rates. The downside: your home is collateral, so borrow wisely.

3. Cash-Out Refinance

With a cash-out refinance, you replace your existing mortgage with a new one that has a higher loan amount. The difference between the old and new mortgage amounts is given to you in cash. This option allows you to access your home equity while potentially securing a lower interest rate on your mortgage. Caution: if your new interest rate is higher, and you are borrowing most of your equity, you could end up with a higher mortgage payment than before. Also, if you are starting over with a new 30-year term, it will take some time for your home equity to build up again.

4. Reverse Mortgage

For homeowners aged 62 or older, a reverse mortgage allows you to convert part of your home equity into cash without having to sell your home. Instead of making monthly mortgage payments, the loan is repaid when you sell the home, move out, or pass away.  Homeowners should consider all their housing options and think long-term, however.  Depending on your situation, selling your current home and collecting your equity in a lump sum, could be the better option!

5. Shared Equity Agreements

In a shared equity agreement, you sell a portion of your home equity to an investor in exchange for cash. The investor then shares in the future appreciation or depreciation of your home’s value. This option doesn’t require monthly payments, but you will need to settle the agreement when you sell the home or after a set period. These can be risky agreements – have an attorney look things over!

We hope this information helps! As Exclusive Buyer’s Brokers, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times.

Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Exclusive Buyer’s Broker, CEBA-M, MCNE, CSP, PSA,e-PRO, CREM, ABRM, AHWD
Buyer’s Resource Realty Services www.BuyersHome.com
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax