Using Your Equity: How to Borrow Against Your Home the Smart Way

For many homeowners, home equity is something that quietly builds over time. It’s a number you might glance at on a mortgage statement or that comes when people talk about selling. 

But what if you didn’t have to wait until you sold your home to benefit from it?

Borrowing against your home equity is a strategy that allows you to access the value you’ve built up and put it to work now. Whether you’re looking to consolidate debt, fund home improvements, or cover major life expenses, this approach can offer flexible, lower-cost borrowing options compared to many traditional loans.

What Does It Mean to Borrow Against Your Home?

Home equity is the difference between your home’s current market value and the amount you still owe on your mortgage. If your home is worth $400,000 and you owe $100,000, you have $300,000 in equity.

Borrowing against that equity means using your home as collateral to secure a loan or line of credit. Lenders typically allow you to borrow a portion of your available equity (often up to 80% or 85%) depending on the type of product.

When Using Home Equity Can Be Beneficial

• You’re planning home improvements that may increase your property’s value

• You want to consolidate high-interest debt into a lower-rate loan

• You need funds for education, medical expenses, or other major costs

• You prefer predictable repayment terms or flexible access to funds

In these scenarios, tapping into your home equity can provide access to large amounts of funding – often with lower interest rates than unsecured loans or credit cards.

When It Can Be An Unnecessary Risk

• You’re borrowing to cover ongoing shortfalls in everyday expenses

• You’re unsure whether you can comfortably manage the new monthly payments

• Property values in your area are declining, increasing the risk of going “underwater”

• You’re considering a product without fully understanding the repayment terms or long-term implications

Because your home is on the line, it’s important to borrow wisely and only when it aligns with a clear financial strategy.

Common Ways to Tap into Home Equity

Here are four of the most popular methods, along with who each might be best suited for:

1. Home Equity Loan

A lump-sum loan with a fixed interest rate and fixed monthly payments. Best for: Homeowners who want predictable payments for a one-time expense.

2. Home Equity Line of Credit (HELOC)

A revolving line of credit you can draw from as needed, with a variable interest rate. Best for: Those who want flexibility to borrow over time – like for ongoing renovations or a rolling emergency fund.

3. Equity Sharing Loan

A loan product with monthly payments that’s backed by a shared equity arrangement. Best for: Homeowners who want lower monthly payments than a traditional loan and are comfortable sharing future equity gains.

4. Equity Sharing Agreement

A lump sum upfront with no monthly payments – the investor shares in your home’s future appreciation. Best for: Those who are asset-rich but cash-flow sensitive, or want to avoid taking on more debt.

Is Tapping Into Home Equity Complicated?

Not necessarily, but it does take some research to choose the right product. Each method comes with its own terms, timelines, and financial trade-offs. Speaking with a financial advisor or housing counselor can help you choose the right path based on your goals, income, and risk tolerance.

For traditional HELOCs and home equity loans, you can apply through a lender or bank, providing your home’s value, mortgage details, and credit profile. If you’re drawn towards the newer equity-sharing model, reach out to a specialized provider like Unison, who can help you understand if equity-sharing is the right approach for you and your financial goals.

Borrowing against your home can be a powerful financial tool, but it’s not a decision to take lightly. Used strategically, it can help you unlock opportunities and manage major expenses more affordably. Just make sure to understand the risks, weigh your options, and choose the product that fits your financial picture today and down the road.

Disclaimer: This content is for informational and educational purposes only and does not constitute financial, legal, or lending advice. Loan terms and availability vary by lender and state. Consult a qualified financial professional or lender for personalized guidance tailored to your situation.

Unison Mortgage Corp NMLS ID 2574289