How to Get Equity Out of Your Home Without Refinancing

Key Takeaways: 

• You can access your home equity through a home equity loan, HELOC, reverse mortgage, home equity agreement, or sale-leaseback arrangement.  

• Home equity loans and HELOCs typically require good credit and come with additional monthly payments.

• Reverse mortgages allow seniors to convert their home equity into cash while eliminating their monthly mortgage payment.

• A home equity agreement (HEA) allows you to access your equity without monthly payments or strict credit requirements.

• The best option depends on your credit score, income, age, and financial goals.  

Millions of homeowners are sitting on large amounts of home equity but won’t refinance, because they don’t want to lose their existing mortgage rate. Fortunately, there are ways to tap home equity without refinancing.  

The solution that’s right for you depends on your current financial situation, and each option comes with different trade-offs. If you’re wondering how to get equity out of your home without refinancing, here’s a look at the available options for different types of homeowners.  

First, How Much Equity Do You Have — and How Much Can You Access? 

Before comparing your options, it’s important to understand how much equity you have in your home. Your home equity is the difference between your home’s current market value and what you still owe on the mortgage. For example, if your home is currently worth $600,000 and you owe $300,000 on your mortgage, you have $300,000 in home equity.  

However, just because you have equity in your home doesn’t mean you can access all of it. Most lenders look at your combined loan-to-value (CLTV) ratio, which measures your total mortgage-related debt against your home’s appraised value. Most lenders will only let you borrow up to 80% of your available equity. 

But some alternatives, like home equity agreements, don’t rely on CLTV limits the same way traditional lenders do. So, the right option is less about the product itself and more about your current situation.   

Deciding which method of accessing home equity might work for you involves asking important questions about your specific needs and financial profile. Here are a few scenarios to consider.  

If You Have Strong Credit and Want a Predictable Monthly Payment 

A home equity loan, also known as a second mortgage, lets you borrow against your home equity and receive a one-time, lump sum payment. You’llreceive fixed interest rates and will repay the loan with monthly payments, typically over five to 30-year repayment terms. Because your interest rate is fixed, your payments will stay the same over the life of the loan.  

For example, a $60,000 home equity loan with a 10-year repayment term and an 8.5% interest rate would result in monthly payments of $744. Knowing exactly what you’re going to pay each month can make budgeting easier, especially if you’re using the funds to consolidate debt or fund a home renovation. 

To qualify, lenders look for a CLTV under 85% and a credit score of 620 or higher. Your debt-to-income (DTI) ratio is also an important consideration. However, your home serves as collateral for the loan, so if you fall behind on payments, your lender has the right to foreclose on your property.  

Best for: Homeowners with strong credit who need a specific dollar amount and prefer a fixed repayment schedule.  

If You Have Strong Credit and Want Flexibility in How Much You Borrow 

A home equity line of credit (HELOC) works like a credit card that’s secured by your home. Instead of receiving an upfront sum of money, you’re given access to a revolving line of credit you can draw from on an as-needed basis. The draw period typically lasts 10 years, and you’ll only make interest payments on the amount you borrow.  

Once the draw period ends, you’ll enter the repayment period, which usually lasts five to 20 years. At that point, you can no longer borrow any money and must repay the existing balance.  

The biggest benefit of a HELOC is the flexibility that comes with it. For example, if you’re completing a phased home renovation project, it can be hard to predict the exact costs. A HELOC allows you to borrow money as you go, and you only repay what you actually borrow. 

Most HELOCs do come with variable interest rates, so your payments can rise or fall based on current market conditions.⁵ Some lenders may offer a fixed-rate lock option that lets you lock in all or part of your balance at a fixed rate.  

The qualification requirements are similar to those of a home equity loan — you’ll need a minimum credit score of 620 and a CLTV ratio below 85%. And HELOCs are also secured by your home, so you risk foreclosure if you’re unable to repay the loan.  

Best for: Homeowners with strong credit who need flexibility in how much they borrow and how they repay what they borrowed.  

If You Want to Access Equity Without Taking on Debt or Monthly Payments 

A home equity agreement (HEA), also known as a home equity investment, lets homeowners access a portion of their home equity without taking out a loan. Instead of borrowing the funds and making monthly payments, you receive a lump sum upfront in exchange for sharing a portion of your home’s future appreciation. 

The biggest difference between an HEA and other home equity products is that there are no monthly payments. And there are no minimum incomerequirements, which can make HEAs an option for homeowners with large amounts of equity who don’t qualify for traditional financing. 

Instead, the agreement is typically settled when you sell the home, refinance, or reach the end of your agreement term. At that point, the company receives its original investment back plus the shared appreciation. 

For example, let’s say your home is worth $500,000 and you receive $50,000 in exchange for 10% of the home’s future value. If you sell the home for $620,000, that means the property has appreciated by $120,000. The company would receive its original $50,000 plus 10% of the appreciation for a total repayment of $62,000. 

The trade-off is that you’re giving up a portion of your home’s future value in exchange for immediate access to cash without new monthly payments. For homeowners who are focused on cash flow and limiting new debt, that trade-off may be worth it.

Best for: Homeowners who want cash without monthly payments, or who don’t qualify for a traditional home equity loan or HELOC. 

If You Are 62 or Older and Want to Stay in Your Home 

A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), allows homeowners age 62 and older to convert a portion of their home equity into cash. Depending on the loan, you can receive the money as a lump sum, fixed monthly payments, a line of credit, or a combination of the three. 

Reverse mortgages eliminate your monthly mortgage payments, which can be helpful for seniors living on a tight budget. The loan balance continues to grow over time and doesn’t need to be repaid until the homeowner sells the property, moves out, or passes away. And reverse mortgage proceeds are considered loan distributions, not taxable income, so they aren’t subject to federal income taxes. 

However, a reverse mortgage won’t eliminate all costs related to your home. You’ll need to continue paying your property taxes, homeowners insurance, and maintaining the property. And you must continue to use the home as your primary residence.⁷ 

Before taking out a reverse mortgage, it’s important to consider how it could affect your estate plans. If you pass away before repaying the loan, your heirs will have to either repay the loan balance or refinance if they want to keep the property. Plus, taking out a reverse mortgage could minimize or eliminateany remaining equity for them to inherit.  

Best for: Homeowners 62+ who plan to age in place and want to access home equity without selling. 

If You Need Liquidity Quickly and Are Open to Giving Up Ownership 

A sale-leaseback agreement allows homeowners to sell their property to an investor and then remain in the home as renters. Because you’re selling the property outright, you can unlock most or all of your home equity without having to move out. It provides a fast source of liquidity for homeowners facing financial hardship while allowing them to stay in their home. 

However, this option comes with significant trade-offs. Once you sell the property, you no longer own the home and become a tenant. You’ll lose access to any long-term property appreciation and tax benefits. Plus, you’re now responsible for ongoing rent payments to the new owner.  

Unlike a home equity agreement, where you retain ownership and only share a portion of future appreciation, a sale-leaseback means giving up the deed entirely. For that reason, it’s often used as a last resort by borrowers facing significant financial hardship.  

Best for: Homeowners facing urgent financial hardship who need full equity access and are open to transitioning from owner to renter. 

The Bottom Line 

When it comes to accessing your home equity, the best option depends on your credit profile, income, age, and willingness to take on additional debt. An Unlock HEA might be a good fit if you’re looking for a flexible method of tapping home equity without monthly payments.  

Still have questions? Here are answers to the questions homeowners ask the most.