How to take out equity from your home and save money monthly
Contributed by Karen Idelson, Tom McLean
Jul 14, 2025
•6-minute read

Your home holds more than just emotional value – it has financial value you can access without selling it. If you’ve built equity in your home as the value has increased over time or as you’ve paid down your mortgage, you can borrow your home equity.
We’ll show you how to determine how much equity you have and go over the 3 best ways to access equity: a home equity loan, a home equity line of credit (HELOC), and a cash-out refinance.
Determining how much equity you have available
Equity is the difference between your home’s value and how much you owe on it. It’s a source of capital you can use to consolidate high-interest debt, cover financial emergencies, and pay for long-term projects.
The easiest and most direct way to build equity is to reduce the amount you owe on your home. This will happen naturally over time as you pay down your mortgage.
You also gain equity as the value of your home increases. Over time, home values generally appreciate. For example, between the second quarter of 2023 and the second quarter of 2024, U.S. home prices rose 5.7%.This doesn’t mean your home’s price will always increase each year. The economy and the state of the housing market will have an influence on the value of houses.
The first step in determining how much equity you have is to estimate your home’s current market value. You can do this by looking up what comparable homes have recently sold for your area. Common factors affecting home value include:
- Its age.
- Its location.
- The size and shape of the lot.
- The number of bedrooms and bathrooms and usable square footage.
- Access to amenities like transportation or a highly rated school district.
- How safe the neighborhood is.
- Recent renovations and upgrades.
An estimate that a lender will accept requires a professional appraisal.
Once you know your home’s value, the next step in calculating your home equity is to look up how much you still owe on your mortgage. You can call your lender or check your most recent mortgage statement for this information. You can then subtract the amount you owe on your mortgage from your current home value to get an estimate of your equity. For example, if your home is valued at $500,000 and you have $200,000 to pay on your mortgage, your home has $300,000 in equity.
However, you can’t turn your full equity amount into capital. Most lenders and programs limit how much equity you can borrow at 80% or 85%. In the example above, this would mean that you may be able to borrow $240,000 to $255,000 against the value of your house.
How to take equity out of your home
There are several ways to borrow your equity. Depending on the terms you want, a home equity loan, HELOC, or cash-out refinance may be right for you. Let’s go over each option.
Home equity loan
A home equity loan is a second mortgage that lets you borrow your equity. You receive a lump-sum and make regular payments in addition to your primary mortgage payment.
Pros and cons of a home equity loan
Depending on your financial situation and how you plan to use the money, this could the right way for you to draw on your home equity. Here are some of the pros and cons:
Pros
- Provides a lower interest rate than personal loans or credit cards.
- The interest rate usually is fixed .
- If you use the loan for home improvements, interest may be tax deductible.
- If the rate on your first mortgage is lower than what you’d get on a home equity loan, you don’t have to let it go.
Cons
- Increased risk in adding a second mortgage payment. Missed or late payments can put your home at risk.
- You pay closing costs.
- You pay interest on the entire loan amount, regardless of whether you’re using the money slowly for an ongoing remodeling project or all in one payment.
- Depending on your interest rate for your first mortgage, the rate for a home equity loan could be more than a cash-out refinance.
Home equity line of credit (HELOC)
Another way you can borrow your equity is through a HELOC, which is another type of second mortgage. Your equity establishes a line of credit that you can use as needed in the draw period, during which you make payments only on the amount you borrow. Once the draw period expires, you repay the remaining principal plus interest and can no longer take out money.
Pros and cons of a HELOC
Let’s look at some of the pros and cons so you can consider whether this option is right for you.
Pros
- Provides a lower interest rate compared with personal loans or credit cards.
- It’s flexible. You only borrow what you need.
- If you use the loan for home improvements, interest may be tax deductible.
Cons
- Increased risk in adding another mortgage payment. Missed or late payments can put your home on the line.
- You may have to pay fees to secure the line of credit.
- Interest rate is often variable, meaning payments might fluctuate.
Rocket Mortgage® doesn’t offer HELOCs, but we can help you explore other ways to access your equity.
Cash-out refinance
If you don’t want to take on a second mortgage, you could choose a cash-out refinance. You take on a new mortgage based on your home’s current value, pay off your existing mortgage and keep the difference in cash. You repay what you borrow as part of your new mortgage payment.
Pros and cons of a cash-out refinance
These pros and cons will help you review this possible choice.
Pros
- Provides a lower interest rate compared with personal loans or credit cards.
- You don’t have to juggle two mortgage payments.
- If you use the loan for home improvements, interest may be tax deductible.
- You can get a fixed-rate loan with a predictable payment.
Cons
- When you increase the loan amount, you’ll likely increase the monthly payment, unless you’re refinancing and getting a significantly lower interest rate.
- Resetting your loan term means it’ll take more time to pay off your mortgage.
- You pay closing costs.
Which home equity method is right for you?
With several ways to draw on your equity, it may not be immediately obvious which one makes sense for you. You’ll need to think about your long-term goals, consider the pros and cons of each loan type, and weigh your own comfort in taking on additional debt.
If you’re looking for a lump-sum cash payout soon and are comfortable managing two mortgage payments, a home equity loan could work for you. On the other hand, a HELOC might be the right fit if you want to access smaller amounts of your home’s equity on an as-needed basis. Should you be uncomfortable with two mortgage payments and prefer predictable payments, even if they’re more expensive, then a cash-out refinance could work for you.
FAQ
Let’s cover a few questions that you might still have about accessing your home equity.
Is it a good idea to take equity out of your home?
Taking equity out of your home might make sense for you, but it isn’t for everybody. If you have high-interest debt from credit cards or need to take on a home renovation project, equity is one way to gather the cash needed.
How do I access the equity in my home?
A lender will help you take out a line of credit that leverages your home’s equity. You are essentially borrowing money with the terms that if you can’t pay it back, the lender can foreclose on your home.
Can I pull equity out of my home without refinancing?
Yes, you can pull equity out of your home without refinancing through a home equity loan or a HELOC. These might be good choices for you if a cash-out refinance isn’t right for you because you’d take on a higher interest rate or other reasons.
What is the cheapest way to get equity out of a house?
This depends on your personal situation, your overall credit profile, and which terms make you most comfortable. You will have to compare costs for a cash-out refinance, home equity loan, and HELOC based on how much you want to borrow and your budget.
What are the requirements to take equity out of your home?
To take equity out of a house, you would generally need to meet the same requirements as a first mortgage which include a stable source of income, good credit score, low debt-to-income ratio as well as sufficient equity to borrow.
The bottom line: You have options for leveraging your equity
Sometimes unexpected expenses come up, or you may want to use your home equity for a meaningful project or a special family celebration. As you consider your options as well as the risks, you can come to a decision that’s right for your personal situation.
If you’re interested in tapping into your equity, let us at Rocket Mortgage help you apply for a home equity loan.

Michael Rosenthal
Michael Rosenthal brings over a decade's worth of experience writing for finance, tech, education, and entertainment. He earned his bachelor’s in writing and a certificate in public & professional writing from the University of Pittsburgh along with a master’s in television production from Boston University.
His previous work includes developing personal finance education for a Fortune 500 company and articles for various mortgage lenders. When he’s not writing for Rocket Mortgage, Michael spends his time fixing up his well-aged home in Los Angeles one leaky sprinkler at a ti
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