You can get access to your home equity through a cash-out refinance, a home equity loan, a home equity line of credit (HELOC) or a reverse mortgage. A cash-out refinance allows you to take out your equity by getting a new mortgage at a higher loan amount. You replace your current mortgage with a bigger one and get the difference in cash. Like any refinance, your new mortgage pays off your old one, so you just have one monthly mortgage payment. It generally takes between 30 and 45 days to refinance. When you do a cash-out refinance, you usually need to leave some equity in the home. The amount you’ll have to leave depends on the type of loan you’re seeking, but you should expect to leave about 20% equity in the home.Cash-Out Refinance
Home Equity Loan
A home equity loan is a second mortgage on your home. It doesn’t replace your current mortgage; it’s a second mortgage that requires a separate payment. For this reason, home equity loans tend to have higher interest rates than first mortgages.
Like a cash-out refinance, a home equity loan is a secured loan that uses your home equity as collateral. This gives you access to lower interest rates than unsecured loans, like personal loans.
Once you close on your home equity loan, you’ll receive a lump-sum payment from your lender, and in return, you’ll make payments on the loan over a predefined term.
Lenders rarely allow you to borrow 100% of your home’s equity for a home equity loan. The maximum amount you can borrow will vary by lender but it’s typically between 80% and 90% of the value of the home. Rocket Mortgage® is now offering home equity loans, which are available for primary and secondary homes.
Home Equity Line Of Credit (HELOC)
A home equity line of credit is also a second mortgage on your home. The main difference is that a HELOC gives you a line of credit you can draw from when you need it. The credit limit corresponds to the amount of equity you have in your home.
You can withdraw money from your HELOC at any time during the draw period defined by your lender. Most draw periods are between 5 and 15 years. HELOCs may have a minimum monthly payment due (similar to a credit card), or you may need to pay off the accrued interest each month. At the end of the draw period, you’ll need to repay the full amount you borrowed.
Rocket Mortgage does not offer home equity lines of credit at this time.
Reverse Mortgage
If you’re over the age of 62 and would like to boost your retirement savings, you may want to consider a reverse mortgage. There’s no monthly mortgage payment with a reverse mortgage, though you must still pay taxes and insurance.
With a reverse mortgage, your loan amount is based on the amount of equity you have in your home. If you have an existing mortgage, the proceeds of the loan are used to pay it off. The remaining balance is available for you to use as you see fit.
A reverse mortgage can be a good choice for homeowners who plan to stay in their home indefinitely and aren’t worried about leaving an inheritance. It can give you cash in retirement if you don’t have anywhere else to get it.
Rocket Mortgage does not offer reverse mortgages at this time.
