How to Get Equity Out of Your Home Without Refinancing

Many homeowners today are sitting on significant equity in their homes but are hesitant to refinance their mortgage. With interest rates rising in recent years, it’s no surprise. If you locked in a 3% mortgage rate or lower, giving that up to access cash can feel like a bad trade. Fortunately, there are smart alternatives that let you tap into your home’s value without refinancing your first mortgage.

In this guide, we’ll break down three main ways to get equity out of your home without refinancing: a home equity loan, a home equity line of credit (HELOC), and home equity investment agreements. Each option offers different benefits depending on your financial goals and needs.

Why You Might Not Want to Refinance Your Mortgage

For many homeowners, refinancing just doesn’t make financial sense right now. Here’s why:

• You have a low interest rate on your current mortgage
• Refinancing comes with high closing costs and fees
• You’d lose favorable loan terms like a longer payoff timeline or no prepayment penalty

According to Freddie Mac, more than 60% of U.S. homeowners have a mortgage rate below 4%. Giving up a historically low rate could add thousands to your long-term costs.

Main Ways to Access Equity Without Refinancing

Home Equity Loan

A home equity loan allows you to borrow a lump sum based on the equity you’ve built in your home. It comes with a fixed interest rate and set monthly payments.

Pros:

• Predictable payments make budgeting easier
• Fixed interest rate offers long-term stability

Cons:

• Interest begins accruing immediately on the full loan amount
• Less flexible if you need funds in stages

This option is ideal if you are consolidating bad debt like credit cards, personal loans, or high interest rate auto loans or just need a lump sum of money now.

HELOC (Home Equity Line of Credit)

A HELOC is a revolving line of credit that works much like a credit card. You can draw funds as needed during the draw period (typically 5–10 years), and you only pay interest on the amount you use.

Pros:

• Flexibility to borrow as needed
• Typically offers lower initial payments with interest-only options

Cons:

• Variable interest rates can lead to payment increases
• Requires discipline to avoid overspending

HELOCs are great for ongoing expenses or if you’re unsure how much you’ll need. This is the most common loan type to get equity out of your home without refinancing.

Home Equity Investment (Alternative Option)

A newer alternative, home equity investments involve companies offering you cash in exchange for a share of your home’s future value. No monthly payments are required and repayment usually occurs when you sell the home or after a set number of years.

Best for:

• Homeowners with limited income or high debt
• Those who want to avoid monthly payments

These agreements aren’t loans but they do reduce your future proceeds when selling the home. Use caution and read all terms carefully.

Comparing HELOCs vs Home Equity Loans

Learn more in our full comparison: HELOC vs Home Equity Loan

How to Qualify for a Home Equity Loan or HELOC

Credit Score and Debt-to-Income Requirements

Most lenders look for a FICO score of at least 680. Some lenders go down to 620 for certain home equity options but HELOCs and HELoans tend to be a bit more difficult to qualify for than a standard cash-out refinance. A score of 720+ gives better rates and terms. Debt-to-income (DTI) ratios should usually stay below 45% but home equity products can vary widely from lender to lender.

Equity Requirements

You’ll typically need at least 15–20% equity left in your home after taking out the second lien. That means your combined loan-to-value (CLTV) ratio can’t exceed 80–90%.

Example: If your home is worth $400,000 and you owe $250,000 on your mortgage, your current LTV is 62.5%. You may qualify to borrow up to an additional $70,000 to $90,000, depending on lender limits.

Can You Qualify With Bad Credit?

Some lenders offer home equity loans or HELOCs to borrowers with credit scores as low as 620, but expect higher interest rates and stricter terms.

Explore more: Can You Get a Home Equity Loan with Bad Credit?

Pros and Cons of Accessing Equity via Second Liens

Pros:

• Keeps your low-rate mortgage intact
• Can be quicker than refinancing
• Flexible borrowing options

Cons:

• Adds a second monthly payment
• HELOCs can have unpredictable costs if the rate is adjustable
• Failure to repay may lead to foreclosure

When a Cash-Out Refinance Might Still Make Sense

In some cases, a cash-out refinance is still worth considering:

• You have a high-rate mortgage already
• The new rate would still save you money overall
• You prefer one monthly payment
• Home equity loans or HELOCs aren’t an option due to issues qualifying (most common)

Compare total closing costs and interest savings to see if a refinance could actually reduce your total borrowing costs.

More on this: Cash-Out Refinance vs Home Equity Loan or HELOC.

How to Decide Which Option Is Right for You

Ask yourself these questions:

• What is your current mortgage rate?
• How much equity do you have?
• What will you use the money for?
• Can you handle a second monthly payment?
• Do you need flexibility or a fixed repayment plan?

If you’re still unsure, speak with a trusted loan officer or mortgage advisor. They can help evaluate your goals and guide you through the decision.

Common Uses for Home Equity Funds

Many homeowners use their equity for:

• Home renovations or upgrades
• Consolidating high-interest debt
• Funding investment opportunities like real estate
• Creating an emergency cash reserve

Using your equity wisely can help improve your financial future without sacrificing the benefits of your original mortgage.