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Posted on 06/23/2022 in Hard Money Loans

What is Home Equity? How Can You Use It?

As you pay down your mortgage each month, you’re building up home equity in the property. This equity can later be used for a wide range of projects and purposes of your choosing.

But how do you access this equity? There are a few different ways to tap into it, including with a cash-out refinance or a home equity loan.

Let’s dig into what home equity is, how it works, and the pros and cons to help you determine whether now is a good time to tap into your equity for a new project or investment.

What is home equity?

Home equity can be viewed or defined from a few angles.

It essentially is the difference between the current value of your property and what you owe on your mortgage loan.

“Current” is a key term here, because your home could have either increased or decreased in value over time.

You build up equity in your property as you make your monthly payments, but it also can build if your home increases in value over time.

Home equity can also increase if you make home improvements that boost the value.

How to calculate your home’s equity

To calculate your equity, you can take the current value of the property and subtract the remaining balance.

For example, if your home is worth $300,000, and your current mortgage balance is $250,000, you have $50,000 of equity in the property.

Equity is a valuable source of savings and financing for property owners, and is the most common way for homeowners to build wealth over time.

How does home equity work?

To build equity, all you have to do is make your monthly mortgage payments.

The most helpful way to get a jump-start on building equity is to make a large down payment when you purchase a property, and to stay up on payments.

Then, when you have enough equity in the property, you can cash out on it to use for other projects.

How do I find my home’s current value?

If you’re curious how much equity you have in your property, you’ll need to do a little research. 

You can start by searching online for an estimate of your property’s current value.

Online estimates are usually based on comparable home sales in the area. Check out other recent home sale prices to get an idea of what your home may be worth.

You can subtract your current mortgage balance from this estimate to get your equity amount.

Only a licensed real estate appraiser can give you an accurate, official appraised value, but estimates can help you determine whether it’s a good time to look into cashing out on your current equity.

How much equity can I actually take out?

When you tap into your equity with a mortgage lender, you don’t take out the full amount, but instead take out a portion of it. This amount is based on a specified loan-to-value (LTV) ratio.

However, depending on how much equity you have in your property, this usually is still a significant sum of money.

Marquee Funding Group always looks out for a borrowers best interest and can help borrowers tap into their home equity without requiring borrowers to payoff their good low rate mortgages. Marquee can fund cash out loans in 2nd, 3rd and even 4th position.

In these modern times of resign interest rates, Marquee Funding’s 2nd and 3rd mortgage products can offer borrowers a way to tap into their home equity while still keeping their global interest expense below market rates.

What’s your loan scenario?

We’re proud of our reputation as a common sense, no-nonsense private money lender. If you need a mortgage approved, let us take a look. We do fund loans others won’t.

Pros and cons of home equity loans

Tapping into equity isn’t the right choice for everyone. 

It’s important to have your timing right, including having the right amount of equity in your property and using it for the right purposes.

There are three main ways borrowers tap into home equity:

  1. Home equity loan
  2. Home equity line of credit
  3. Cash-out refinance

With a traditional lender, such as a bank, borrowers will have to qualify for these loans based on certain credit score, income, and debt requirements.

Hard money lenders offer quick cash-out loans for borrowers based on the overall merits of the deal, with the understanding that most borrowers need to access this cash quickly to meet their unique goals.

Let’s take a look at these loans.

Home equity loans

A home equity loan is a second mortgage secured by your property. If you qualify for this loan based on lender requirements, they will pay you your equity in a lump sum.

You will begin repaying this loan immediately, at a fixed interest rate.

Home equity line of credit (HELOC)

HELOCs work like credit cards, where you will withdraw the amounts you need and repay them.

Most HELOCs have variable interest rates, which means your payments can fluctuate over the life of the loan.

Again, whether you qualify for a HELOC relies heavily on your credit history.

Cash-out refinance

A cash-out refinance is the simplest way to tap into home equity, because it can be accomplished with a hard money lender.

With a cash-out refinance loan, you refinance to a larger loan and take out the difference in a lump sum.

Cash-outs let you borrow against the equity in your home, rather than relying on your credit. As a result, borrowers can receive larger amounts of cash with lower interest rates. 

Additionally, you’ll end up with only one mortgage instead of two.

Hard money lenders make the process even simpler, with flexible documentation, closing in as fast as seven to 10 days, and the ability to use the cash for whatever projects or purposes of the borrower’s choosing.

The most common purposes include home improvements, debt consolidation, and putting a down payment on another property.

Choose a hard money lender for your cash-out loan

If you’re interested in cashing out on the precious home equity locked in your property, submit your loan scenario to Marquee Funding Group today.

Unlike institutional lenders and underwriting, we are a private money lender. Our lending decisions are based on the merits of each deal and the benefits to our customers.

We leverage our years of experience to make quick decisions, which makes our loans ideal for real estate investors or those in unique scenarios that require fast action.

We also are ideal for self-employed borrowers, fix-and-flippers, or any borrower who may have issues proving to a traditional lender that they can repay their loan based on typical documentation requirements.

Marquee offers a wide range of loan options, including:

  • Purchase money, rate-and-term refinance, and cash-out refinance
  • Owner-occupied or non-owner-occupied consumer or business purpose loans
  • Single-family, multi-family, commercial, industrial, construction, and land loans
  • Ground up, fix-and-flip, or fix-and-occupy loans
  • Loan amounts from $50,000 to $20 million
  • Loan-to-value up to 70% (deal specific)

We look forward to helping you tap into your home’s equity with a quick hard money cash-out loan.

Don’t hesitate to reach out to our team with any questions you have about our unique process.

Marquee Funding Group Inc. specializes in consumer and non-consumer loans secured by all types of real property (including owner-occupied) in California as well as investment property loans in most other states.