Consolidating equity

Assume you purchased a house for 0,000, made a 20 percent down payment, and got a loan to cover the remaining 0,000.In this example, your home equity interest is 20 percent of the property’s value: The property is worth 0,000 and you contributed ,000—or 20 percent of the purchase price.If you still owe money on any mortgages, you won’t get to use all of the money from your buyer, but you’ll get to use your equity.Borrow against the equity: You can also get cash and use it for just about anything with a home equity loan (also known as a second mortgage).However, it’s wise to put that money toward a long-term investment in your future—paying your current expenses with a home equity loan is risky.Fund retirement: You can choose instead to spend down your equity in your golden years using a reverse mortgage.

If you're unable to repay for any reason, your lender can take your house in foreclosure and sell the property to recover its investment.After a certain number of years (10 years, for example), the draw period ends, and you’ll enter a repayment period in which you more aggressively pay off all of the debt, possibly including a hefty balloon payment at the end.HELOCs usually feature a variable interest rate too, so you could end up having to pay back much more than you planned for over the 15- to 20-year life of the loan.We noticed that you're using an old version of your internet browser to access this page.To protect your account security, you must update your browser as soon as possible.

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