8 Alternative Ways to Get Equity Out of Your Home in 2024

About 66% of Americans own their homes. 

If you fall into that category, congrats! You’ve got a major asset on your hands.

You’ve probably paid off at least some of your mortgage, so you have equity in your home. That wealth is yours. But how can you get it out of your home and into your wallet?

One way is through a home equity loan. But those can come with serious downsides:

Possible fees…darn.

Interest…no, thanks.

The risk of foreclosure…yikes!

I bet you want other options. That’s why, below, I’ve described eight alternative ways to get equity out of your home.

What is a Home Equity Loan?

A home equity loan (HEL) allows you to borrow money by using your home equity as collateral.

Here’s a look at the process:

• Step 1: You secure the loan against your home equity.
• Step 2: You receive the loan in a lump sum.
• Step 3: You pay back the loan (with interest) through monthly payments.

Let’s break that down further, starting with a definition of “home equity.”

Home equity is the value of the portion of your home that you own outright. 

So let’s say you own a house with a value of $200,000, but you still owe $80,000 in your mortgage. That means your home equity is $120,000.

With a home equity loan, you use that home equity as “collateral.”

And what’s collateral?

Basically, it’s something a borrower makes available to a lender so that the lender can take it if the borrower doesn’t pay the lender back. 

So in the case of a home equity loan, the lender can foreclose on your house if you fail to make the monthly payments.

Those are high stakes, and the risk is real! 

That’s why it’s worth considering alternative ways to get equity out of your home.

Pros and Cons of Home Equity Loans 

Home equity loans are useful, but they’re not perfect. Like any financial strategy, they come with real perks and also real disadvantages. 

Check out the pros and cons. Then decide if you’d be better off trying one of the alternative ways to get equity out of your home.

Pros

• Provides access to larger loan amounts. Using your home equity as collateral can allow you to get more money upfront.

• Fixed interest rates. While paying interest is never fun, it’s nice to know that the rates won’t increase.

• Predetermined monthly payments. You’ll pay the same amount every month, and that consistency can make it easier to manage your finances.

Cons

• There’s a risk of foreclosure. Fail to make your payments? You could lose your home!

• You could end up “underwater.” Yes, this is as bad as it sounds. Basically, it means your home is worth less than what you owe in loans, making it impossible to pay off your debts by selling your home.

• (Possible) fees and charges. Some (but not all) home equity loans have fees. Something to consider as you shop around. 

Best Alternative Ways to Get Equity Out of Your Home

So you’ve got wealth tied up in home equity, and you want to turn it into money you can actually spend. 

A home equity loan is far from the only option. Here are the top alternative ways to get equity out of your home.

1 – Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is similar to a home equity loan in that you use your home equity as security. 

But here’s the difference: While a home equity loan gives you a lump sum of cash upfront, a HELOC gives you a line of credit that you can draw from as you choose.

Imagine you’ve got $250,000 in home equity, and you want to turn some of that equity into cash.

With a HELOC, you’ll get a credit line – let’s say it’s $18,000. That means you can borrow up to $18,000, but you don’t have to. 

That flexibility makes a HELOC one of the best alternative ways to get equity out of your home. 

2 – Unlock 

Unlock is a service that allows you to tap (or “unlock”) your home equity without taking a loan or paying interest. 

No monthly payments and no interest, and yet you still get the money up front, just like with a home equity loan. 

Magic?

No, just a clever financial strategy called a “home equity agreement.” Here’s the process in a nutshell:

• Unlock gives you money upfront
• You sell the home (or buy them out) within a 10-year period 
• You use the proceeds from the sale to pay back the money Unlock gave you at the start.

But what’s in it for them? Are they just kind people?

Well, I’m sure they are kind people (they get great online reviews!), but that’s not why they provide this service. 

When the home is sold, Unlock takes an agreed-upon percentage of the money made from the home’s increase in value. 

So let’s say your home’s value has increased by 20% since you first took the deal from Unlock. That increased value turns into profit during the sale, and, as part of the deal, you’ll owe Unlock a portion of that profit. 

You get to access your home equity, and they get a share of the spoils when you sell. Who doesn’t like a win-win?

This video from Unlock gives a brief overview of how home equity agreements work and how one could even benefit your credit score.

3 – Unison

Unison is another home equity agreement company that helps people turn their home equity into money they can use.

Unison’s model is similar to Unlock’s: You get money upfront in exchange for a portion of your home’s future appreciation in value. 

As with Unlock, you won’t have to pay interest or even make monthly payments. That’s what makes these services some of the best alternative ways to get equity out of your home. 

One thing to note: Unison requires slightly higher credit scores than Unlock: 680 or higher, to be exact. 

Before applying, make sure your credit score is above Unison’s threshold. If it’s not, Unlock could be a better option. 

4 – Hometap 

Hometap is yet another service that unlocks home equity in exchange for a portion of the earnings you’ll get from eventually selling your home. 

Like Unlock and Unison, Hometap gives you money that was previously tied up in home equity, and you don’t have to worry about monthly payments. And like Unlock, Hometap only requires a credit score of 500.

To settle their investment, homeowners pay a previously agreed-upon percentage of the home’s total value through a cash payment, refinancing, or selling the home before the 10-year term expires.

Get a detailed breakdown of how the benefits and drawbacks of these three home equity agreement companies stack up in our Hometap vs. Unison vs. Unlock comparison.

5 – Cash-Out Refinance

With a cash-out refinance, you replace your primary mortgage with a new one. A new mortgage that allows you to pocket most of the equity you have in your home. 

So it’s kind of like a home equity loan, except that you’re replacing your current mortgage rather than adding a second loan on top of it. 

Of course, you’ll have to pay the closing fees. 

You could also face higher monthly payments or longer loan terms, and the longer you take to pay off your loan, the more you’ll pay in interest. 

6 – Sale Lease-Back 

Wouldn’t it be nice to sell your property without having to leave it? 

Sounds impossible – you know, like having your cake and eating it, too. 

But it’s doable through a sale lease-back program.

The investors who run these programs will buy the home, then lease it back so you can continue living there. 

You get the money from the sale, and they get a valuable investment property – all without disrupting your lifestyle. 

7 – Shared Appreciation Mortgage

A shared appreciation mortgage is a tool that lets you tap your home’s equity by ceding partial ownership of your property to an investor.

Typically, the shared appreciation mortgage company will give you a chunk of money upfront. 

They also tend to charge lower interest rates than standard mortgages. 

In exchange, they’ll lay claim to a portion of the home’s appreciation in value. Then, when you sell, they’ll get their share of the profit.

Think of this model as a hybrid. Think half standard mortgage, half home equity agreement. 

You’ll make payments like a standard loan, but you’ll share your home’s value appreciation like with a home equity agreement. 

8 – Reverse Mortgage

Ah, reverse mortgage. The most famous of the alternative ways to get equity out of your home. 

You have to be at least 62 years old to be eligible. 

Meet that requirement? Then this is an option worth considering.

Here’s how it works:

1. You get money that’s derived from your home equity. That money can come in a lump sum, monthly payments, or even a line of credit. As you receive money, your balance will increase from interest and fees.

2. The deal finishes when you stop “residing” in the home. This usually is because you’ve moved out or died. At that point, you or your heirs must either (a) sell the home to pay off the balance or (b) find some other way to pay off the balance.

Commonly Asked Questions About Alternative Ways to Get Equity Out of Your Home

What is the Cheapest Way to Get Equity Out of a House?

Home Equity Lines of Credit, or “HELOCs,” are often considered the cheapest way to get equity out of a house because there are no closing costs, and you only borrow as much money as you need. But home euqity agreement companies like Unlock, Unison, and Hometap provide another affordable option since you don’t pay interest or make monthly payments. 

Can You Get Equity Out of Your Home Without Refinancing?

There are plenty of ways to get equity out of your home without refinancing. One option is to take out a home equity loan or a home equity line of credit (HELOC). Home equity agreement services like Unlock, Unison, and Hometap also allow you to tap equity by taking a share of your home’s future appreciation in value. 

What are Different Ways to Get Equity Out of Your Home?

Home equity loans allow you to borrow against your home equity, but there are other options. Alternative ways to get equity out of your home include HELOCs, reverse mortgages, and home equity agreement services like Unlock, Unison, and Hometap that offer money upfront in exchange for a percentage of your home’s appreciation in value.

How Can I Get Equity Out of My Home With No Income? 

It’s possible to apply for a home equity loan without any income, especially if you have assets to fall back on. Another option is a home equity agreement provider like Unlock, Unison, or Hometap that only asks for proof of income under certain circumstances. 

Is Pulling Equity Out of Your House a Good Idea? 

Tapping your home equity for immediate funds can be a good idea if (a) you simply need the money, (b) you’re sure you can make any payments, or (c) you’ll use the money for home improvements that will increase your property’s value.

Tapping into your home’s equity with a home equity agreement company like Unlock, Unison, or Hometap removes the worry about monthly payments from the equation.

Is it Smart to Take All the Equity Out of Your Home? 

Taking all the equity out of your home is a risky move. That’s your biggest asset, and you don’t want to deplete it for no reason. Tap home equity responsibly. Many people use it for home improvements that will increase their home’s value.

How Soon Can You Pull Equity Out of Your Home? 

You can start pulling equity from your home as soon as you buy it. But that’s probably not the best idea. Remember, your equity increases as you pay off your mortgage. The longer you wait, the more equity you’ll have to draw from.

How to Get Equity Out of Your Home With Bad Credit?

Unlock and Hometap are great options for getting equity out of your home with less-than-stellar credit. In fact, both Unlock and Hometap require a minimum credit score of an amazingly reasonable 500. If your score is even lower, you may want to look into boosting it with one of the best credit repair companies.