Accessing Your Home Equity the Right Way
One of the primary reasons that people consider refinancing their current mortgage is to tap into the power of the home’s equity. While this is the right choice for many people, it is always a process you should study carefully before initiating next steps.
How to Calculate Equity
The value of your home minus the balance of the mortgage is your home’s equity. You may be eligible for accessing your home equity, withdrawing it, and investing it in several different ways, including post-secondary education, home renovations, additional real estate and more.
Different Ways to Access Home Equity
Increasing the value of your mortgage by refinancing can enable you to access up to 80% of the home’s equity. In addition to a mortgage refinance, there are two other options you may wish to consider, known as the second mortgage and a home equity line of credit.
A second mortgage enables you to receive up to 80% of the loan to value ratio and these often come with a much higher interest rate. Bear in mind that this is one of the reasons why these are less popular as well as the fact the not all lenders will offer them.
Home Equity Line of Credit
A home equity line of credit does not lead to the funds advanced up front. You withdraw the funds as you wish and only pay interest from the amount that you take out and therefore not subject to a refinance penalty.
An experienced mortgage professional can assist you with determining your equity refinance options. It’s also a good idea to schedule a consultation with a knowledgeable real estate lawyer who can help walk you through the process.