
Tapping into your home equity is a great way to access funds for immediate financial needs. While selling your home is one way to achieve this goal, there are many other solutions that allow you to take equity out of your home without abandoning your property. Learn about these six alternative ways to get equity out of your home.
Cash-Out Refinance
With cash-out refinancing, a homeowner replaces their current mortgage with a newer, larger loan. This refinancing strategy results in access to a lump sum of cash reflecting the difference between your new loan amount and the existing mortgage balance.
How Does a Cash-Out Refinance Work?
In the cash-out refinance process, you'll first need your property appraised for its current market value. Then, you'll submit an application for a new mortgage loan, which indicates the amount you want to borrow on top of your current balance. Upon approval, you'll receive a new mortgage balance that includes both of these amounts. Then, after paying off your existing mortgage with the funds received, you can apply the remainder towards immediate financial demands.
To receive approval for a cash-out refinance, you must typically have at least 20% equity in your home, a good credit score, and proof of reliable income. Similar to a home equity loan, a cash-out refi involves fixed monthly payments that begin immediately.
Pros of Cash-Out ReFi
Before choosing this option to unlock home equity, take into account the following cash-out refinance pros and cons.
Cons of Cash-Out ReFi
Home Equity Line of Credit
A home equity line of credit, also known as a HELOC, is a borrowing option that allows you to access cash using your home equity as collateral.
How Does a Home Equity Line of Credit (HELOC) Work?
HELOCs function similarly to a traditional credit card, with your home acting as the credit line.
To begin the HELOC mortgage process, a lender will need to assess three factors: your current financial standing, the amount of home equity you have, and your home's current market value. After you're approved for a home equity line of credit and a credit limit is determined based on your home's equity, you can use the funds at any time for any amount (up to the limit).
In order to get approved for a HELOC, you must be at least 18 years old, have a stable stream of income and good credit score, and own around 15% to 20% equity in your home. Once your HELOC's funds are depleted, you'll enter the repayment period, which typically involves monthly payments on the principal and accrued interest.
Pros of Home Equity Line of Credit
As with other equity alternatives, there are several advantages and disadvantages of home equity lines of credit to consider before borrowing.
Cons of Home Equity Line of Credit
Home Equity Loan
Home equity loans, or second mortgages, are fixed-term loans that allow homeowners to borrow against their property's equity.
How Does a Home Equity Loan Work?
Acquiring a home equity loan requires a lender to assess your financial standing and the amount of home equity you have. If you're approved, you'll be given an upfront lump sum based on these factors, which can be used to cover important expenses.
Home equity loans vary from reverse mortgages, which do not involve regular monthly payments. In a second mortgage, you must begin paying it back immediately. While home equity repayment periods differ by lender, this typically occurs over the course of five to 30 years. Meeting home equity loan requirements usually means having at least 15% to 20% equity in your home, a strong credit score, a stable source of income, and a low debt-to-income ratio.
Pros of Home Equity Loans
There are many pros and cons of home equity loans to be aware of, including:
Cons of Home Equity Loans
Home Sale Leaseback
If you'd prefer to access home equity without refinancing or accruing debt, consider a home sale leaseback. This is a real estate transaction in which a homeowner sells their property and becomes a tenant, continuing to live in their home (or elsewhere) while paying rent for the house.
How Does a Home Sale Leaseback Work?
After finding a buyer, the home sale leaseback option works just like selling a home. In this sell and leaseback process, you'll define terms and transfer ownership to the buyer, who will then ask you to sign a lease agreement. Then, you can either begin living in your home as a tenant or lease the property out while living elsewhere, as long as you make regular rental payments to the buyer-turned-owner.
Pros of Home Sale Leaseback
Here are a few sale and leaseback advantages and disadvantages that can help you decide whether this option is right for you.
Cons of Home Sale Leaseback
Reverse Mortgage
Reverse mortgage loans are unique alternatives to home loans. They allow homeowners over the age of 62 to convert a portion of their home's equity into cash. Unlike traditional mortgages, where homeowners make monthly payments to a lender, reverse mortgages require lenders to make regular payments to the borrower.
How Does a Reverse Mortgage Work?
To get a reverse mortgage, you must first submit your application and home appraisal. Once you are approved, you'll be given an estimate determined by the amount of equity you've built in your home. Rather than making regular payments to the lender, these payments will be disbursed to you to use as you please. You (or your loved ones) must repay these funds when you sell your home or pass away. To be eligible for a reverse mortgage, you must be at least 62 years old and have a significant amount of home equity.
Pros of Reverse Mortgages
Below are the primary advantages and disadvantages of reverse mortgages.
Cons of Reverse Mortgages
Home Equity Sharing Agreement
Home Equity Sharing Agreement
A Home Equity Sharing Agreement (HESA), Shared Equity Agreement, or Home Equity Investment, is a way for homeowners to access a portion of their home equity without taking on additional monthly payments or selling their property.
How Do Home Equity Agreements Work?
The process and terms will vary by provider, but generally a home equity agreement works by homeowners first receiving a lump sum of cash in exchange for a percentage (typically between 15-50%) of the appreciation of their home in the future. Unlike a traditional loan, you don't have to make any monthly payments and simply pay when you sell your property or the agreement ends.
Pros of Home Equity Agreements
Below are the following pros and cons of a home equity sharing agreement.
Cons of Home Equity Agreements
With Unison's equity sharing agreement, many of these downsides don't apply. We'll convert up to 15% of your home's value to cash, so you can put those funds to work for you and continue owning your home. Like other home equity agreements, Unison features no monthly payments or added interest. But the best part is that we often share in your loss should your home decrease in value. And we make it easier than ever to end your agreement or sell your home if your circumstances suddenly change.
Get a free estimate with Unison today, with no financial obligation or impact to your credit.
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About the Author

Dr. Lauren Rosales-Shepard
Dr. Lauren Rosales-Shepard is Unison’s content writer. She has a PhD in English from the University of Iowa, and after several years of teaching rhetoric and composition as a college professor, she joined Unison in 2022 to bring her writing and research skills to the realm of fintech in real estate.