There’s more than one way to turn home equity into money you can use. The right choice depends on how much you need, how long you need it, what your current mortgage looks like, and whether you need it all at once. Here’s an overview of the three main routes.

1. Refinance your mortgage

You replace your existing mortgage with a new, larger one and take the difference in cash.

  • Good for: larger amounts, a single new payment, and moments when your mortgage is renewing anyway.
  • Watch for: a prepayment penalty if you break your mortgage before the end of its term, plus legal and appraisal costs.
  • Who offers it: banks, credit unions, alternative and private lenders, each with different limits.

2. Add a second mortgage

You keep your existing mortgage and add a separate loan registered behind it.

  • Good for: keeping a low rate on your first mortgage, avoiding a large penalty, or borrowing a moderate amount for a set period.
  • Watch for: a higher rate than a first mortgage, two payments, and two maturity dates to manage.
  • Who offers it: mostly alternative and private lenders, and some credit unions.

3. Open a home equity line of credit (HELOC)

A revolving credit limit secured by your home. Borrow what you need, when you need it, and pay interest only on what you use.

  • Good for: ongoing or uncertain expenses, like a renovation paid in stages, or an emergency backup.
  • Watch for: variable rates, interest-only minimum payments that never reduce the balance, and the temptation to keep borrowing.
  • Who offers it: mainly banks and credit unions, for borrowers who qualify on income and credit.

How to choose

Ask yourself:

  1. How much do I need, and when? All at once points to a refinance or second mortgage; over time points to a line of credit.
  2. What does my current mortgage cost to break? If the penalty is large, a second mortgage or line of credit may win.
  3. When does my mortgage renew? If it’s soon, waiting to refinance may avoid the penalty.
  4. Will a bank approve me? If not, an equity lender’s refinance or second mortgage may be the option. See what is an equity mortgage?

Don’t skip the comparison

The cheapest route isn’t always obvious. Penalties, fees, rates and how long you’ll carry the debt all change the answer. See what equity mortgages cost and the risks of borrowing against your home.

This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.