Your home isn’t just where you live—it’s also one of your most powerful financial tools. Whether you’re looking to fund a renovation, cover unexpected expenses, or invest in something important, tapping into your home’s equity can be a smart move.
But not all options are created equal. One way to access the equity in your home is to do a cash-out refinance, which we typically do not recommend. While it can provide a large lump sum of cash, the downsides often outweigh the benefits—especially in today’s market.
Here’s why we usually steer clients away from cash-out refinancing:
- You’ll restart your mortgage. Even if you’re years into paying down your loan, a refinance resets the clock—stretching your debt out again over 15–30 years.
- You could lose a lower interest rate. If you bought when rates were low, refinancing now means accepting today’s higher rates and increasing your monthly payments.
- Closing costs can be significant. Just like when you originally bought the home, cash-out refinancing comes with thousands in closing fees.
- It reduces your equity. Pulling too much can limit your financial flexibility in the future—or leave you with little equity if home values dip.
Thankfully, there are smarter, more flexible ways to access the value in your home—without giving up a great mortgage or selling the property.
Here are three solid options worth considering:
1. Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit that uses your home’s equity as collateral. Think of it like a credit card—but with better terms and interest rates.
How it works: You’re approved for a maximum credit amount and can borrow from it as needed during the “draw period” (usually 5–10 years). You only pay interest on what you use.
Pros:
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Flexible and reusable—great for ongoing expenses
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Lower interest rates than personal loans or credit cards
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Interest-only payments during the draw period
Ideal for: Home improvements, education costs, emergency funds, or staggered expenses over time
Things to know: Rates are usually variable, so your payment can change. You'll eventually enter a repayment period where both interest and principal are due.
2. Home Equity Loan
A home equity loan is a second mortgage paid out as a lump sum with fixed payments over a set term.
How it works: You borrow a specific amount based on the equity in your home and repay it with a fixed interest rate over 5–20 years.
Pros:
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Predictable monthly payments
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Fixed interest rate
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Ideal for large, one-time expenses
Ideal for: Major renovations, debt consolidation, or funding a large project with a clear cost
Things to know: You’ll be taking on a second loan, so this will be in addition to your existing mortgage.
3. Reverse Mortgage (for homeowners aged 62+)
A reverse mortgage lets eligible older homeowners convert part of their home equity into cash, typically without monthly mortgage payments.
How it works: You borrow against your home equity and receive the funds as a lump sum, monthly payment, or line of credit. The loan is repaid when you sell, move, or pass away.
Pros:
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No monthly repayment required while you live in the home
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Can supplement retirement income or cover medical costs
Ideal for: Seniors wanting to stay in their home while accessing equity
Things to know: It reduces the equity left to heirs and requires ongoing taxes and insurance to stay in good standing.
Need Help Finding the Right Fit?
Your home is one of your most valuable assets—and tapping into its equity should be done with care, clarity, and the right guidance.
At The Geiger Stern Team, we can connect you with trusted local lenders who will walk you through your options, explain the pros and cons, and help you make a financially sound decision based on your long-term goals.
Not sure where to start? Reach out to The Geiger Stern Team. We’re happy to connect you with the right professionals to make the most of your home’s value—without sacrificing your peace of mind.
