Homes are major investments. When you first purchase your home, the idea is that the value will increase. When you sell it, you hope to make a profit. OF course, while you own the home, your money gets tied up in it, which makes it hard to free your cash up to use elsewhere.
When certain investments arise, having liquid cash is incredibly important. The good thing is, having a house can come in handy in a situation where you need cash. There are plenty of ways that one can tap into the value of their house, though today, we’re going to talk about the top three.
If you are a homeowner over 62, you can use a reverse mortgage to access available cash through the equity of your home. At a higher age, there is a greater chance that you already have a fair amount of money tied up in your home. According to Investopedia, homeowners over the age of 62 had $7.14 trillion in home equity in the first quarter of 2019.
With a reverse mortgage, you can get cash based on the current equity you have in your home. The beautiful thing about having a reverse mortgage is that you don’t have to make any payments until you sell the property, move out, or pass it on as an inheritance.
One of the downsides to having a reverse mortgage is that the money you owe increases as time goes on. Traditionally, the cost of a reverse mortgage is a 2% upfront fee and closing costs.
Home Equity Line of Credit (HELOC)
Getting a Home Equity Line of Credit is one of the best ways to get a line of credit for big expenses, as it is secured against your property’s value. You must have a regular income source to get a HELOC. In order to take advantage of this, you essentially need to work full time. With a HELOC, you make monthly payments.
It should be noted that you start paying the HELOC off right away after borrowing. If your home equity falls due to the result of the market, you may have this equity line frozen.
Cash-out refinances allow you to borrow money and refinance your mortgage simultaneously. Rather than having to pay a large chunk of change during the closing, you receive money. When you refinance, you roll your borrowed amount, as well as your closing costs, into the new mortgage.
Your monthly payments will change depending on the interest rates and loan term. In some cases, they may increase, as you have to pay off your refinancing costs. However, if you do it strategically, you might be able to free up some cash with a lower interest rate.
It should be noted that the majority of lenders will only let you perform a cash-out refinance if you have a minimum of 20% equity after you refinance.
Of course, to get the most money out of your home, you may consider selling it in full for cash. To get cash from your home sale quickly and efficiently, we recommend selling through National Cash Offer. We can offer you a fair rate and get you the cash you need in as little as two weeks!