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How to get the most equity out of your home

If you can wait before tapping into your home equity, you can increase how much you can borrow.

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If you’re a homeowner, your home can be a valuable source of cash for a variety of purposes. By tapping into you Home is equal — How much value you’ve built into your home — You can access funds to cover emergencies, pay for major expenses, or even Wealth building For the future.

There are several way to do itfrom Home equity loan And Home Equity Lines of Credit (HELOCs) per Cash-out refinancing And reverse mortgage. Whichever option you choose, there are steps you can take to ensure you get the most out of your home equity.

Explore your home equity options here to see how much you can borrow

How to get the most equity out of your home

If you’re thinking about drawing from your home equity, here are four ways to increase how much you can get.

Wait until home values ​​are high

yours Home equity is calculated Subtract your outstanding mortgage balance from the current market value of your home. The more your home is worth, the more equity you have.

For example, let’s say you bought your home for $400,000 and you paid off $100,000 of your mortgage, bringing your outstanding balance down to $300,000. If your home was valued at $500,000, you would have $200,000 in equity ($500,000 – $300,000). If your home is worth $550,000, you’ll have $250,000 in equity ($550,000 – $300,000), and so on.

If you don’t need the funds right away, you may be better off waiting until the home is worth more so you have more equity. You can monitor the value of your home using a site like Zillow.

Find out if a home equity loan or HELOC is right for you by checking current rates here.

Make home improvements

Some home improvements can increase the value of your home. For example, Zillow lists kitchen and bathroom updates, new windows and enhancing curb appeal among the top improvements for increasing home value.

Whether it’s a small improvement like refinishing the floor or a big one like replacing an old roof, the more value you add to your home, the more you’ll get out of it.

Pay more towards your mortgage

Reducing your mortgage balance also increases your home equity. As long as your lender doesn’t charge a prepayment penalty, you can pay off your mortgage faster by paying more each month or paying half your mortgage every two weeks.

When you pay off your mortgage biweekly, you make a total of 26 half-payments per year. That’s 13 full payments — one more payment than you’d make if you paid once a month for 12 months. This can be an easy way to put more towards your mortgage without significantly restricting your budget.

Improve your credit score

yours Credit score Affects how much lenders are willing to lend you. The higher your score, the more confident they’ll be that you’ll pay them back and the more willing they’ll be to lend to you.

Lenders usually Allow you to borrow Up to 80% of your home equity. The higher your credit score, the higher the percentage they can pay you.

You generally need a score in the mid to high 600s to get approved for a home equity loan or HELOC. A score of 700 or higher can get you more (and at a better rate). If your score is on the low side, focus It’s an improvement To increase how much you can borrow before applying for a home equity loan or HELOC.

Bottom line

If you can wait before tapping into your home equity, you can increase how much you can borrow. Applying for a higher home value, making home improvements, paying more toward your mortgage, and raising your credit score can all give you access to larger amounts of equity.

In the meantime, make sure you meet others requirementSuch as a low debt-to-income ratio, to make it easier to apply and get approved when you’re ready.

Start your home equity loan or HELOC search now by comparing your options.

MoneyWatch: Managing Your Money

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