Owned a Home for Five Years? You Can Be Sitting on a Pile of Cash

When you bought your home a few years back, you probably figured you'd be working to pay down your mortgage for at least fifteen years. But what most people don't realize is that their home is worth way more now than it was even five years ago. Home values in your neighborhood are skyrocketing, and banks are all about letting you borrow large sums of cash against the new appraised value of your house. All that money you've diligently invested in your home? It's time to let it pay you back with a pile of cash.

How much cash are we talking about? Let's break down the specifics. According to Zillow, the average American home value has increased by 25% (from 158K to 198K). For the median household, that means you're looking at a lump sum of $40,000. That's $40,000 of equity that you have access to, and you didn't put a dime of it in yourself. Even better? Home prices are expected to keep rising from here on out. When it comes down to it, tapping into your equity can be a smart financial tool that can really pay off.


The options for using your home's equity are quite literally endless. You could use that $40,000 to finally tackle that big basement remodel you've been saving for, while potentially hiking up the value of your home in the process. You could invest other big-ticket home improvements, such as a new roof or windows, but don't be afraid to think outside of the box. You could use that cash to pay for your child's college tuition, pay down the last of your credit cards and finally be debt-free, or to invest. Another smart option is to use your equity to consolidate any high-interest debts into a lower interest debt that you can pay off quickly and deduct on you tax returns. (Fun fact: Homeowners can deduct up to 100K of interest, so why not use that to your advantage?)

Three Simple Ways to Access Your Pile of Cash

There are three options available to access your cash: Home Equity Loan, Cash Out Refinance, and Home Equity Line of Credit (HELOC). Each has their perks, so make sure you get the one that works best for your current situation.

1. Home Equity Loan

If you've refinanced in the last five years, a home equity loan may be your best bet to grab that cash without resetting your already super low rate. You’ll borrow against your equity, but keep your current rate.

2. Cash Out Refinance

Haven't even thought about refinancing yet? A cash out refinance can get you an even lower interest rate with minimal closing costs. You could end up with the cash you need and a lower interest rate (which could mean a lower monthly payment).

3. Home Equity Line of Credit

A HELOC is sort of like a credit card pulled from your home’s equity. Instead of getting a lump sum like you would with the other two, you get a line of credit you can draw on when you need it. This can be great if you don’t know the exact cost of your renovation/tuition/other large expense, and want to pay for it as it comes.

Whichever way you go, you want to make sure you have the details you need to make the best possible decision—we’re talking about a lot of money here. The excellent news: you don't have to make this decision alone! With LendingTree's comprehensive and easy-to-use system, you can compare your loan options and choose which will work for you and your financial goals. Head to LendingTree.com to start shopping for your money now.


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