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• HELOCs vs. Equity Sharing Agreements vs. Cash-Out Refinance

Evaluating HELOCs vs. Equity Sharing Agreements vs. Cash-Out Refinance

Home Equity Line of Credit (HELOC) vs. Equity Sharing Agreement vs. Getting a Cash-Out Refinance: What to Consider

If you're a homeowner, you may be considering tapping into your home equity to finance a major purchase or home improvement project. But what's the best way to do that? Should you get a home equity line of credit (HELOC), enter into an equity sharing agreement, or get a cash-out refinance?

Here's a look at some things to consider when making your decision:

Home Equity Line of Credit (HELOC)

With a HELOC, you can borrow against the equity in your home and repay the loan over time, usually with a variable interest rate. One benefit of a HELOC is that you only pay interest on the amount you borrow, and you can access funds as you need them. However, because HELOCs typically have variable interest rates, your monthly payments could go up if rates rise.

Equity Sharing Agreement

An equity sharing agreement allows you to sell a portion of your home's equity to an investor in exchange for cash. The investor then becomes a co-owner of your home, and you agree to share the proceeds when you sell the property. One advantage of an equity sharing agreement is that you don't have to make monthly payments. However, you'll typically need to sell the property within a certain time frame, and you may not be able to get the full value of your equity when you sell.

Cash-Out Refinance

A cash-out refinance allows you to refinance your existing mortgage and take out a new loan for more than you owe. The difference between the two loans is paid out in cash. With a cash-out refinance, you'll have a new mortgage with new terms and a new monthly payment. However, you may be able to get a lower interest rate than you're currently paying, which could save you money over time.

When choosing between a HELOC, equity sharing agreement, or cash-out refinance, there are a few things to consider. Think about how much money you need and how quickly you need it. Also, consider the interest rate and terms of each option and how they fit into your overall financial picture.