How to Take Equity Out of Your Home
But how do you take equity out of your home? We explore some important options below.
FHA Cash-Out Refinance Loans
FHA cash-out refinance loans can help you take equity out of your home in cash, but if you don’t need a large amount of money, you might wish to consider a different option, such as a personal loan.
If you want to borrow as much of your home's equity as possible, a cash-out refinance can help. Interest rates are a factor to consider for a cash-out refinance. Did you know you may ask the lender to buy down the rate using discount points?
FHA cash-out refinancing requires you to have no late or missed payments for the 12 months leading up to the application, but be sure to consider that as a factor when timing your loan. You may also be required to live in the refinanced property for at least 12 months. This loan requires a new credit check and a new appraisal.
FHA Reverse Mortgages
This is another way to take the value out of your home in cash. An FHA reverse mortgage is for those who own or are about to own their home outright.
The FHA reverse mortgage is not offered to all borrowers. Only those aged 62 or older may qualify for this type of refinancing which offers the borrower cash at closing time and no monthly payments.
Instead, mortgage is paid in full when the borrower dies or stops using the home as their primary residence. The home is sold, and the lender takes the proceeds. This loan requires a new credit check and a new appraisal.
Home Equity Line of Credit
Conventional lenders may offer you a home equity line of credit, which does exactly what it sounds like it does. The borrower gets a line of credit from the bank with the home used as collateral.
The FHA does not offer a home equity line of credit, but conventional lenders may allow you to borrow up to 85% of the home’s value minus any remaining debt you have on the property. This loan requires a new credit check and a new appraisal.
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Reliable Borrowers Can Qualify for a Cash-Out Refinance
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