One way to access cash quickly is to tap into your home’s equity. However, when you’re borrowing against your home, it’s important to proceed with caution and to understand your options.

Some of the common options for accessing your home’s equity include:

  • Cash-out refinance
  • Home equity loan
  • Home equity line of credit

If you’re in Columbia, South Carolina and you need to access your home’s equity, contact Bob Rankin with Covenant Mortgage Services. He will work with you to determine the most appropriate solution for your goals.

In this article, we’ll explore the concept of home equity, how it works, and how you can use it.

Home Equity Defined

Your home’s equity is the portion of your mortgage that has been paid off. It is the difference between what your home is worth and what you still owe. For many homeowners, equity is a way to build wealth over time. Equity grows as you pay down the principal on your mortgage and your value increases over the long term.

Typically, home equity is used to cover large expenses and is a more cost-effective option than personal loans or credit cards which often have high-interest rates.

How Does it Work?

The most common ways to access your home equity are: cash-out refi, home equity loan, and HELOC. The application process for these options is similar to applying for a mortgage. You can apply through an online lender, bank, credit union, or other financial institution that offers these products.

Several factors will be considered:

  • Debt-to-income
  • Loan-to-value
  • Credit score
  • Annual income

In addition, the lender will get an appraisal to determine the value of the home, based on condition and comparable properties in the area.

Why Use Home Equity?

If you have a large expense, tapping into your home’s equity can be a suitable, low-cost way to borrow the funds at favorable interest rates. However, the right loan depends on your needs and purpose for the money.

6 Ways to Use Home Equity

There are not very many limitations on how the equity of your house can be used- but there are some good ways to make the most of these funds. Some of the best ways to use your home equity include:

  • Home repairs/renovations
  • College costs
  • Debt consolidation
  • Emergency expenses
  • Wedding expenses
  • Business expenses

Things to Keep in Mind when Using Home Equity

Even if you do have significant equity built up in your home and believe it’s a good option to fund your large expense, there are some things to keep in mind when using your home equity.

Value of Your Home May Decrease

There is no guarantee that the value of your home will increase over time. In fact, in times of economic downturn or if there is damage due to extreme weather or a fire, your home may actually lose value.

If you borrow against your home’s equity and the value of your home decreases, you may owe more than your home is worth. This is referred to as being “upside-down” or “underwater” on your mortgage.

Limited to What You Can Borrow

When you borrow against your home’s equity, there is a limit to how much you are eligible for. In order to determine this amount, the lender will calculate your loan-to-value ratio.

Typically, lenders allow homeowners to borrow up to 85% of the value of their home minus the existing balance on the mortgage. This may be different from one person to another and depends a lot on your current income, credit score, and financial history.

Know What Not to Use Home Equity For

The worst reason to tap into your home’s equity is for an unnecessary personal expense, such as a luxury vehicle or vacation. It’s much better to build a savings plan for things like this instead of taking it out of your home.

Additionally, don’t borrow more than you need, avoid overspending, and don’t put your house at risk of foreclosure on frivolous purchases.


Even if you do decide to use your home’s equity to increase the value of your home or improve your financial position, if you don’t repay what you borrow, the lender could foreclose on your home.

Make sure that you can afford to continue paying your regular mortgage as well as the loan you’ve just taken out. If you’re ready to access your home’s equity in Columbia, South Carolina, contact Covenant Mortgage Services. Bob Rankin can help you determine what your best option is. He believes that the best option is not what your budget can technically handle, but what you can handle with your preferred lifestyle.