Home Equity: How to Use It

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Real Estate

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:

  1. Down payment on a second home
  2. Repaying credit card debt
  3. Remodeling projects
  4. Buying a new vehicle
  5. 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:

  1. Debt consolidation
  2. 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:

  1. Getting large sums of money ($30,000 or more)



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.