How to Get Equity Out of Your Home Without Refinancing

Think refinancing is the only way to access your home equity? There are alternative options that will allow you to keep your current mortgage.

Many homeowners assume that refinancing is the best way to access home equity, but what about these constantly changing mortgage rates?

Refinancing might not always be the best choice

Home prices rose by 6.1% in 2024, practically gifting many homeowners with a significant equity boost.

If you want to get equity out of your home without refinancing, several alternatives are worth exploring.

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What is home equity?

Home equity is the part of your home’s value that you actually own, calculated by subtracting your remaining mortgage balance from the property’s market value.

Your equity grows as you pay down your mortgage or your home’s value increases. The good news is that you can access this equity without refinancing your mortgage.

Options to access home equity without refinancing

Though refinancing might be your best way to access home equity, it also means taking on an entirely new mortgage—often at a higher interest rate.

There are a few other options for homeowners who want to avoid that.

Home equity loan

A home equity loan enables you to borrow a lump sum based on the equity you’ve built in your home. It works like a second mortgage, with fixed monthly payments and a set repayment term.

Pros of a home equity loan

Fixed interest rates make payments predictable.
A lump-sum payout is helpful for significant expenses.
Interest rates are usually more competitive than credit cards or personal loans.

Cons of a home equity loan

Adds a monthly payment on top of your primary mortgage
Borrowing too much can strain your finances.
Missed payments could lead to foreclosure since your home is collateral.

Home equity line of credit (HELOC)

A HELOC is a revolving line of credit that lets you borrow funds against your home’s equity as needed.

HELOCs function like credit cards, with a draw period for accessing funds and a repayment period.

Pros of a HELOC

Flexibility to borrow only what you need
Paying only interest during the draw period can help reduce upfront costs.
Typically offers lower rates than unsecured loans

Cons of a HELOC

Variable interest rates can cause payments to rise.
Risk of over-borrowing and financial stress
Falling home values could leave you owing more than the home is worth.

Home equity investment

A home equity investment lets you receive a one-time lump sum cash payment in exchange for a share of your home’s future appreciation.

There are no monthly payments; the investor receives a portion of the home’s value when it is sold or after a set period.

Pros of a home equity investment

No monthly payments or interest charges
Funds can be used for any purpose
Offers a solution for those who don’t qualify for traditional loans

Cons of a home equity investment

You give up a share of your home’s future value
Can end up being more expensive than a conventional loan over time
May include restrictions on selling or refinancing

Reverse mortgage (for homeowners 62 and older)

A reverse mortgage lets homeowners aged 62 and older turn their home equity into cash without selling the property.

Reverse mortgages don’t have monthly payments, but the loan comes due when the homeowner moves, sells the house, or passes away.

Pros of a reverse mortgage

No monthly payments required
Can supplement retirement income
Homeowners retain ownership of their property

Cons of a reverse mortgage

Interest builds up over time, reducing remaining equity
Must be repaid when the home is sold or vacated
Fees and closing costs can be high

Sale-leaseback agreements

A sale-leaseback arrangement lets you sell your home to an investor while continuing to live there as a tenant. This option provides immediate access to your home equity without requiring you to move.

Pros of a sale-leaseback agreement

Immediate access to cash
No need to relocate
Some agreements allow you to buy back the home later

Cons of a sale-leaseback agreement

Requires monthly rent payments
You lose ownership of your home
Availability may depend on market conditions

Factors to consider before tapping into home equity

Refinancing isn’t for everyone, and these options we’ve discussed may not be either. It all depends on your financial goals.

Interest rates and fees

Interest rates and fees vary depending on how you access your home equity.

Home equity loans and HELOCs often offer better rates than personal loans or consumer credit cards, but they may also come with closing costs.

However, home equity investments and reverse mortgages can lead to higher long-term costs due to shared appreciation or accumulated interest.

Credit score requirements

Lenders usually consider your credit score and debt-to-income ratio when approving home equity loans and HELOCs.

A higher credit score typically leads to better interest rates and terms, making repayments easier. Reviewing your credit profile before applying can improve your chances of approval.

Loan repayment terms

Before choosing an option, it’s vital to understand the repayment terms.

Consider whether payments are fixed or variable
How long does the repayment period last?

Picking a loan with terms that fit your budget can help prevent financial stress.

Impact on homeownership

Some options, like home equity loans and HELOCs, allow you to keep full ownership of your home.

Others, like home equity investments and sale-leaseback agreements, involve giving up part of your equity or ownership rights.

Understanding how each choice affects your ownership can help you make a more informed decision.

Alternative financial solutions

Before tapping into home equity, it’s worth exploring other options.

Budget adjustments, downsizing, or looking for lower-interest personal loans might provide the financial relief you need without using your home’s equity.