Core Insights - Home equity can be leveraged through products like cash-out refinances and home equity loans, allowing homeowners to access funds for various expenses [1][9] - Home equity is defined as the appraised value of a property minus the outstanding mortgage balance, with typical equity requirements for loans ranging from 15% to 20% [2][4] Home Equity Definition - Home equity is calculated as the appraised value of a property minus the outstanding mortgage balance, providing homeowners with a financial resource [1][2] Cash-Out Refinance - A cash-out refinance allows homeowners to take out a new mortgage that is larger than the existing one, enabling them to pay off the original mortgage and receive cash [4][5] - Homeowners can generally borrow up to 80% of their home's equity through a cash-out refinance, with VA mortgage holders potentially borrowing up to 100% [5][6] - The cash-out refinance may have a fixed or adjustable interest rate, and homeowners must pay closing costs and obtain a property appraisal [5][6] Home Equity Loan - A home equity loan is a second mortgage that allows homeowners to borrow against their equity, typically up to 80%, and receive a lump sum [9][10] - Home equity loans usually have fixed interest rates, resulting in stable monthly payments, but may come with higher interest rates than the primary mortgage [10][11] - Repayment of the home equity loan occurs concurrently with the primary mortgage, which can complicate financial management [11] Comparison of Options - The primary difference between cash-out refinances and home equity loans is that a cash-out refinance consolidates the existing mortgage and new funds into one loan, while a home equity loan adds a second mortgage [14][21] - Cash-out refinances may be preferable for those seeking a lower interest rate or wanting to simplify their financial obligations, while home equity loans may be better for those with a low existing mortgage rate [18][21] Additional Home Equity Products - Homeowners can also consider a home equity line of credit (HELOC), which provides access to a line of credit rather than a lump sum, typically with variable interest rates [19][20]