For many homeowners, home equity is a valuable financial resource that can be used to achieve many personal and financial goals from paying for college to buying a second home. This blog will explore a few ways you can leverage your home equity including cash-out refinances, home equity loans, and home equity lines of credit (HELOC).

What Is Home Equity?

Home equity is the difference between the amount owed on a home and its market value. Equity builds as a mortgage is paid down and may grow if local home values increase. This value can be borrowed against over time in the form of a home equity loan, a home equity line of credit, or a cash-out refinance.

Home values generally increased throughout the early 2020s, which means many homeowners could be sitting on significant home equity without even realizing it. According to federal data from Q3 2024, U.S. homeowners hold nearly $35 trillion in home equity, which has more than quadrupled since early 2012. An astounding $14 trillion of that was earned just since the onset of the COVID-19 pandemic in 2020.¹

How Can You Tap Into Your Home Equity?

1.Cash-Out Refinance

A cash-out refinance is a mortgage that replaces your existing mortgage with a larger loan, allowing you to take the difference in cash. This method allows you to receive a lump sum payment.

2.Home Equity Loan

A home equity loan is a second mortgage secured by home equity. It works similarly to a traditional mortgage in that you borrow a fixed amount of money up front, which you then repay in regular installments over a set loan term. Since the loan is secured by your home equity, interest rates are often lower than unsecured loans, including some personal loans and credit cards.

3.Home Equity Line of Credit (HELOC)

A HELOC is a revolving credit line that allows homeowners to borrow money using their homes as collateral. It functions similarly to a credit card, but often with lower interest rates and higher borrowing limits. It provides a credit limit based on the equity you own, allowing you to borrow as needed up to that limit.

There are two main phases to a HELOC: a draw period and a repayment period. During the draw period (typically 10 years), you can borrow money up to your approved credit limit while only paying interest on what you’ve borrowed. Once the repayment period begins, you can no longer borrow money against your limit, but instead must pay back both principal and interest over a set term (typically 20 years).

What Can You Use Your Home Equity For?

Financing secured by any of the above methods can be used to help achieve a wide range of personal and financial goals:

• Pay for college expenses. Mortgage interest rates can sometimes be lower than those of student loans, making cash-out refinances or home equity loans a potentially more cost-effective way to pay for school. HELOCs can also be used for college-related expenses as you can borrow against the line of credit as needed for ongoing costs that are harder to predict upfront.


• Pay off higher-interest debt. Credit card interest rates tend to be significantly higher than those of mortgages. Using any of the above lending methods can help you strategize the type of debt you have by paying down higher-interest lines of credit or loans.


• Pay for personal expenses. Funds secured from your home equity can also be put toward your personal life. From traveling to paying for a wedding or other major event, any of the above options can help you finance your goals.


• Buy a new home, second home, or investment property. These options are ideal for helping to put a down payment on a new home, second home, or a real estate investment.


• Finance home renovations. Taking on home improvement projects can be a great way to spruce up your living space and potentially increase your home’s value. Whether you’re remodeling an existing area or building an addition, any of the above methods can help you customize your dream home.



Plus, Wintrust Mortgage offers renovation loans that allow you to purchase or refinance a home while securing renovation financing in a single loan. This means one application, one closing, and one set of closing costs. Certain loans offer low down payment options and flexible credit score requirements as well as eligibility on a wide range of properties.

Home equity can be a powerful tool for homeowners to achieve a wide range of personal and financial goals. Get in touch with a Wintrust Mortgage lending expert to help you find the best way to tap into your available home equity and meet your individual needs.