Before you decide how to access the equity in your home, it’s important to understand the different options and their implications. A cash-out refinance, home equity loan, or equity sharing agreement all have different pros and cons, so it’s important to understand the difference before making a decision.
With a cash-out refinance, you take out a new loan to replace your existing mortgage and withdraw cash that is equal to the amount of equity you have in your home. This option can be a good way to get access to cash without having to make monthly payments, but it can also be expensive.
A home equity loan is a second mortgage on your home and you will make monthly payments on the loan. This option can be a good way to get a lower interest rate than a cash-out refinance, but it can also be more expensive if you don’t make your payments on time.
An equity sharing agreement is an arrangement where you sell a portion of your equity in your home to an investor in exchange for cash. This option can be a good way to get access to cash without having to make monthly payments, but it can also be risky if the value of your home decreases.