How to Get Free Cash from Your Home

When people reach different milestones in life, it’s easy for things to fall in between the cracks. One prime example of this is getting cash out of your home. When you become a homeowner, you may not realize that it’s possible to get money from your home. This is possible due to the equity that your home has! Accessing equity through your home can be a powerful financial tool when handled with care. This process allows homeowners to access their home’s equity, providing funds for various needs such as debt consolidation, home improvement projects, or even investments.

Understanding Home Equity and How It Can Help You Get Free Cash

Have you, as a homeowner, encountered the phrase ‘home equity‘ in your life? But what does it mean? Home equity is essentially the amount of your house that is yours without counting any home loans. You figure it out by taking away what you still owe on any loans from what your house is worth right now.

How to Increase Your Home’s Equity

The beauty of equity is that you can build it! There are a lot of different methods you can do to boost the amount of equity to your name. There are things within your power and things outside of your control, like the market. Some ways that equity value increases includes:

  • Paying down your mortgage: Regular payments towards your mortgage principal reduce the amount owed on the loan, increasing your ownership stake in the property.
  • Rising property values: If real estate prices go up in your area, so does the value of your house and its associated equity.

How to Tap Into Your Home Equity

A lot of people believe they need to sell their home in order to see cash from their house. However, that’s not the case! Building equity can be done through means such as:

  • Home equity line of credit (HELOC): A revolving line of credit that allows you to borrow against the equity in your home.
  • Second mortgages: These can be a tool for homeowners who need to access additional money.
  • Reverse mortgages: Seniors are the only ones that can benefit from this mortgage option and it can provide an easy way to access equity.

Home Equity Line Of Credit (HELOC)

A home equity line of credit (HELOC) might be the ideal option when it comes to accessing equity. A HELOC is flexible and can provide you with access to funds over a period of time, rather than in one lump sum.

How Does HELOC Work?

Think of a HELOC as a credit card. Your lender will grant you a certain sum, depending on the equity of your property. You can borrow up to this limit as needed which can be not only flexible, but convenient as well. The interest rate on a HELOC isn’t normally fixed, which means it’s variable. Due to the fact that it is variable, it may increase or decrease over time.

A draw period is just one portion of an HELOC. The other period is known as the repayment period. During the draw period, which usually lasts 10 years, you can withdraw money as needed up to your limit while paying off only interest on what you’ve borrowed. Once this phase ends, any outstanding balance must be repaid during the repayment phase.

An HELOC can be a super useful tool. However, it’s also easy for homeowners to be irresponsible with them. Some thighs to keep in mind include the following:

  • Credit Score: Just like other loans or lines of credit, lenders consider your credit score during the approval process. Ensure your credit rating is in optimal condition before submitting an application and be mindful of the hard inquiry.
  • Fees: Be aware that there may be fees associated with opening and maintaining a HELOC, such as annual fees or transaction charges each time you make a withdrawal. So, read the fine print carefully.
  • Risk: Remember that because your house serves as collateral for the loan. That means if you fail to repay, you risk losing your property through the foreclosure process initiated by the lender itself.

Second Mortgages

If you’re a homeowner who requires additional funds, then obtaining a second mortgage may be an option worth exploring. A second mortgage allows you to access your home’s equity while still making payments on the original loan. The amount you can borrow depends on factors like your home equity, credit score, and income level. There are pros and cons that come along with these mortgages. When it comes to benefits:

  • Homeowners can access a pretty big chunk of funding since it depends on the value of home.
  • Interest rates tend to be lower than some other borrowing options, as the loan is secured by your property.

However, when it comes to the drawbacks:

  • Your house serves as collateral, so if you default, the lender has the right to take possession of it through foreclosure.
  • You’ll likely face closing costs, which can add up over time and make this option expensive if not managed well.

Before deciding on a second mortgage, it’s important to weigh the pros and cons carefully. If you need a helping hand and some guidance then you may want to consult with a financial advisor or other professional.

Considering Reverse Mortgages

Are you a cash-strapped senior with significant home equity? If so, then a reverse mortgage may be something you want to have on your radar.

Basics Of Reverse Mortgages

A reverse mortgage allows homeowners aged 62 or older to convert part of their home’s equity into cash without selling their house or paying additional monthly bills. Instead of making payments to a lender, the roles are reversed – hence the name ‘reverse’ mortgage.

The loan amount is based on the borrower’s age, current interest rates, and home appraisal. Carefully think about the risks that come along with this option, despite the immediate cash flow benefits:

  • Risks: High upfront costs (origination fees and insurance premiums), potential impact on eligibility for means-tested government programs like Medicaid, and reduction in inheritance for heirs.
  • Rewards: No required monthly principal or interest payments during your lifetime unless you permanently move out or fail to meet certain obligations.


If you’re lucky enough to be a homeowner, you want to be responsible. During periods of time where you’re strapped for cash and need some moolah,  you may want to consider tapping into your home’s equity. Home equity is essentially the amount of your house that is yours without counting any home loans. You figure it out by taking away what you still owe on any loans from what your house is worth right now. That means the amount you can access in home equity is unique to you! You can access equity through different means but three that were highlighted include the following:

  • Home equity line of credit (HELOC)
  • Second mortgages
  • Reverse mortgages

Regardless, you want to talk to a professional to make sure that tapping into your home equity makes sense for your situation. You should be cautious when choosing this route. However, it could be a good option in the end!

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