Borrowing Against Your Homes Equity

By Kurt Real Estate Nov 23, 2019

You frequently hear commercials about borrowing against your home’s equity for a line of credit to use on kitchen remodels and other home improvements. While you know it’s important to build equity, you’re not sure if this is good or bad. Well, we’re here to dispel the myth that you should never borrow against your home’s equity.

The truth? Borrowing against your home’s equity can actually help you build equity. Home equity lines give you a lump sum that you can use generally up to 30-40 years for large costs such as ongoing home improvements or college tuition. Home equity loans provide a lump sum for a shorter term, to be paid off in 15 years.

Depending on your financial needs, this may or may not be the right option for you. The advantage is you can get a much larger line of credit than a typical credit card which can help tremendously with large costs. However, a home equity line of credit or loan does secure your home as collateral, which may scare off potential buyers.

Borrowing against your home’s equity is more cost affordable because these lines/loans offer lower interest rates and may even be tax deductible. The total amount a lender will be willing to give you, of course, depends on your FICO score, debt-to-income ratio, and other factors. “If you have good credit and favorable lending parameters, most lenders will lend you up to 75% of the equity in your home” (Myth: Never Borrow Against Your Home’s Equity, BHHS California).