Can You Take Equity Out of Your Home Without Refinancing?

Yes, you can take equity out of your home without refinancing. Home equity loans, home equity lines of credit (HELOCs), and home equity investments are three options that let you turn that equity into cash—without changing the terms of your original mortgage loan.

Each of these products has its unique pros and cons, and they’re not right for every homeowner. Use this guide to determine the best way to take equity out of your home without refinancing.

In this guide:

• Can you take equity out of your home without refinancing?
• Ways to tap home equity without refinancing
• Is it a good idea to take equity out of your home?

Can you take equity out of your home without refinancing?

Home equity loans and HELOCs are two of the most common ways homeowners tap into their equity without refinancing. Both allow you to borrow against your home equity in different ways.

With a home equity loan, you get a lump sum and repay the loan monthly over time. A HELOC is more like a credit card. You can withdraw money as needed and repay what you take out with interest.

A third, lesser-known option is a home equity investment. These arrangements let you sell off a share of your home’s future value in exchange for a lump sum. You don’t incur additional debt or owe a monthly payment; the investor simply takes their share of the home’s value at the end of the term or when you sell the house.

Ways to tap home equity without refinancing

Home equity investments, home equity loans, and HELOCs can all be smart ways to leverage your equity. The right choice for your situation depends on your credit score, budget, how much equity you have, and other factors. Here’s how the three products compare:

	Home equity investment	Home equity loan	HELOC
Minimum credit score	500	620	Mid-600s
Income requirement	None	Yes, varies	Yes, varies
Maximum loan-to-value ratio	75% – 80%	80% – 90%	80% – 90%
Maximum debt-to-income ratio	None	43% to 50%, or lower	43% to 50%, or lower
Monthly payments	None	Yes	Yes
Interest rates	None	Yes, usually fixed	Yes, usually variable
Term	10 to 30 years	5 to 30 years	10 to 20 years

Home equity investment 

A home equity investment—aka a home equity sharing agreement—lets you tap your equity without taking on extra debt. The investor will buy a share of your home’s equity, and when the term ends—usually after 10 or 30 years—you’ll buy them out based on the home’s current market value. You might also choose to sell the house or refinance.

You won’t pay interest on home equity investments but will pay more if your home appreciates in value by the time your term ends. Service fees apply (usually 3% to 5% of the payment), and you will need a good amount of equity to qualify. Most equity-sharing agreements allow for only a 75% to 80% loan-to-value ratio, meaning you’ll need at least 20% equity in your house. 

That would look like this: Say your home is worth $500,000. A home equity investor might allow you to borrow up to 80% of that value—or $400,000, minus your current mortgage balance.

Home equity investments can be a wise option if you need cash but can’t afford another monthly payment. They’re also smart if you have a low credit score or need a significant amount of cash. Home equity investors can offer up to $600,000.

>> See our picks for the best home equity investments

Home equity loan 

Home equity loans are more like traditional mortgage loans. You’ll get a lump sum at closing and repay it monthly—plus interest—over five to 30 years. These second mortgages often come with fixed interest rates, meaning they’ll stay the same for your entire loan term.

Like traditional mortgages, home equity loans come with closing costs, and if you sell your home, your sale proceeds will be used to pay off any remaining balance.

Home equity loans are best for homeowners with decent credit who can afford to take on a second monthly payment in addition to their mortgage payment. They’re also a good option if you don’t have much equity, as some lenders will allow for up to a 90% LTV.

For example, if your home is worth $500,000, you could borrow up to $450,000 across your mortgage and home equity loans.

>> See our picks for the best home equity loans

Home equity line of credit 

HELOCs are lines of credit based on your home equity. They turn your equity into a credit card, and you can withdraw money as needed over an extended period of time. You’ll usually make interest-only payments during the withdrawal period of 10 to 15 years and then start making larger monthly payments afterward. HELOCs usually have variable interest rates, meaning your rate can rise over time.

HELOCs often require higher credit scores than other equity products and may not have closing costs. You can also borrow between 80% and 90% of your equity. As with all other options, if you sell your home with a HELOC in place, your sale proceeds will go toward paying it off. 

HELOCs are a smart option if you’re unsure how much money you need or want access to cash over a long period. They can also be a good choice if you can’t afford a large monthly payment.

>> See our picks for the best home equity lines of credit

Is it a good idea to take equity out of your home?

Leveraging your home equity can often be smart, especially if you’re using the funds to pay off higher-interest debt, make valuable home improvements, or start a business. Refinancing is one way to access your equity, but this may not be ideal if you have a low interest rate or want to retain the terms of your current loan.

Other options exist, and weighing all your choices before deciding how to tap your home equity is important. If you’re unsure which is best for your situation, consider speaking to a financial or mortgage professional for guidance. They can help you make the best choice for your finances and goals.

>> Read More: How to take equity out of your home