Home Equity: What Does It Mean and How to Use It
Home equity loans (second mortgage) are installment loans that are paid out in one lump sum. They're often used for:
- Down payment on a second home
- Repaying credit card debt
- Remodeling projects
- Buying a new vehicle
- Purchasing items that add value to your home or life
A home equity line of credit works like a credit card – you agree to a pre-set limit and then borrow as you need to, or in the event of an emergency, usually for up to 10 years. This option is good for:
- Debt consolidation
- Major home improvements
A refinance pays off your current mortgage and gives you cash based on your equity. This is a good option when mortgage rates drop below your current rate and are often used for:
- Getting large sums of money ($30,000 or more)
Summary...
As of this post, January 21, 2024, if you've owned your home for even 1 year, chances are you have built equity. If the situation is right, that equity can work for you.