What is home equity?
Home equity is the difference between the value of your home and how much you owe on your mortgage.
For example, if your home is worth $250,000 and you owe $150,000 on your mortgage, you have $100,000 in home equity.

Your home equity goes up in two ways
– as you pay down your mortgage
– if the value of your home increases

How Borrowing on Home Equity Works
You may be able to borrow money secured against your home equity. Typically, interest rates on loans secured against home equity can be much lower than other types of loans. Not all financial institutions offer home equity financing options. Ask your financial institution which financing options they offer. You must go through an approval process before you can borrow against your home equity. If you’re approved, your lender may deposit the full amount you borrow in your bank account at once.

Refinancing Your Home
You can borrow up to 80% of the appraised value of your home.

From that amount, you must deduct the following:
– The balance on your mortgage
– Your total HELOC amount. If you have one
– Any other loans secured against your home

Your lender may agree to refinance your home with the following options:
– Second mortgage
– HELOC
– Loan or Line of Credit secured with your home

Interest rates and fees if you refinance your home
– The interest rate on the refinanced part of your mortgage may be different from the interest rate on your original mortgage. You may also have to pay a new mortgage loan insurance premium.

You may have to pay administrative fees which include:
– Appraisal Fees
– Title Search
– Title Insurance
– Legal Fees

Your lender may have to change the terms of your original mortgage agreement.

Getting a Second Mortgage
A second mortgage is a second loan that you take on your home. You can borrow up to 80% of the appraised value of your home, minus the balance on your first mortgage. The loan is secured against your home equity. While you pay off your second mortgage, you also need continue to pay off your first mortgage.

Interest rates and fees on second mortgages
– Interest rates on second mortgages are usually higher than on first mortgages because they are riskier for lenders.

You may have to pay administrative fees such as:
– Appraisal Fees
– Title Search
– Title Insurance
– Legal Fees

Getting a Home Equity Line of Credit (HELOC)
A HELOC works much like a regular line of credit. You can borrow money whenever you want, up to the credit limit. You can take out money from a HELOC when you need. You pay it back and borrow again. This line of credit is secured against your home.

Interest rates and fees on a HELOC
– Interest rates on a HELOC are variable. They will change as market interest rates go up or down.

You may have to pay administrative fees such as:
– Appraisal Fees
– Title Search
– Title Insurance
– Legal Fees

Getting a Reverse Mortgage
A reverse mortgage allows you to borrow up to 55% of the value of your home. You must be a homeowner and at least 55 years old to qualify for a reverse mortgage.

Interest rates and fees on second mortgages
– Interest rates on a reverse mortgage are usually higher than on a regular mortgage. They may by fixed or variable.

You may have to pay administrative fees such as:
– Appraisal Fees
– Title Search
– Title Insurance
– Legal Fees

Borrowing on amounts you prepaid
You may be able to re-borrow money that you prepaid. If you’ve made lump-sum payments on your mortgage, your lender may allow you to re-borrow that money. You can borrow the total amount of all the prepayments you made. Any money you re-borrow will be added to the total of your mortgage.

Interest rates and fees if you borrow on amounts you prepaid
– You pay either a blended interest rate or the same interest rate as your mortgage on the amount you borrow. A blended interest rate combines your current interest and the rate currently available for a new term. Fees vary between lenders. Make sure to ask your lender what fees you have to pay. You may not have to make any changes to your mortgage term.

Comparing your options
Decide which type of loan best suits your needs. Compare the different features of each option