Friends. I keep getting emails from my mortgage company offering a chance to pull from my 30k+ equity. How does that work? What happens if I try and cash it out?
In: Economics
There’s a couple ways to leverage your equity. First, you can refinance. This amounts to taking out a new loan to pay off your current mortgage. If this loan was larger than the principle still owed, you can keep the difference as cash. The catch here is that your new loan now has a larger principle and resets your mortgage duration (assuming you stayed with the same duration as the original). Due to interest rates, the new loan may or may not have a higher payment due. If your refinanced mortgage has a lower interest rate, it may offset the larger principle in terms of monthly payments.
The second way is to open a home equity line of credit. It’s basically a 2nd mortgage in that it’s a loan with your home as collateral. The amount of this loan can be up to your equity in the property. You don’t have to refinance in this case, but you’ll have a 2nd bill to pay in addition to your normal mortgage payment.
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