Home Equity

7 Ways to Use Home Equity to Your Advantage

By Tom Burchnell
how to use home equity

As a homeowner, you’ve put time and effort into augmenting your property value. From timely mortgage payments to thoughtful improvements to sheer patience, it takes hard work to develop your home’s equity. What does home equity mean? It’s the difference between what your property is worth, and what you currently owe on its mortgage.

Are you wondering how to use home equity to your advantage?

Refinancing, sale-leaseback options, and home equity loans make it possible to improve your financial situation and achieve your dreams. Here are our seven favorite ways to use home equity to your advantage.

1. Debt Consolidation

Are you paying more than you want to service your debt? Most U.S. households have some combination of the following outstanding debt to lenders:

  • Credit card debt
  • Student loans
  • Car loans
  • Medical debt
  • Legal debt

If you want to lower the monthly payment on your existing mortgage and get on the fast track to financial health, your home equity can help you with debt consolidation.


Credit cards and student loans often have significantly higher interest rates than mortgage and home equity loans.

Refinancing options make it possible to take out cash by using your home’s value as collateral. Then, you can use that money to pay off your high-interest debt. In essence, you’ll be rolling your existing debt into your mortgage.

What are the benefits of refinancing? Consider the below: 

  • Although you’ll still have the same total amount of debt at first, the lower interest rate means more of your monthly payments will go towards the principal balance.
  • Money paid towards mortgage interest is tax-deductible (unlike the interest on most other kinds of debt).
  • If you keep making the same mortgage payment monthly (and stop taking on new debt), you should pay off the mortgage balance quicker.

It may sound like a good option, but there are disadvantages of refinancing to consider.


Want to pay off your debt without rolling it back into your mortgage? If yes, here’s how to lower your monthly payments without refinancing.

A sale-leaseback makes it possible to sell your home for cash, pay off your debt (including your mortgage), and continue leasing your home at a monthly rate. Without monthly debt payments, you’ll have more money in your pocket to make your next move. And you can stay in your home for as long as you want as you work towards your next financial goal. 

A sale-leaseback is one of the best alternative ways to convert home equity.

2. Make Home Improvements

Are you planning on staying in your home for the foreseeable future? Just because you want to hold onto your investment in the long term doesn’t mean you have to keep putting up with the same ancient oven or crumbling bathroom tile.

To that end, you can use a cash-out refinance to make material improvements to your home.

Another option is a home equity loan—another kind of loan that uses your home’s value as collateral. While home equity loans may have higher interest rates (as compared to refinancing), there are some advantages:

  • You won’t be responsible for closing costs
  • The interest rate is still much lower than it is for a credit card or personal loan
  • If your loan is used for home improvement, the interest should be tax-deductible

Whether you’re making a much-needed repair to your roof, replacing a major appliance like a hot water heater, or simply building the kitchen of your dreams (wood-burning pizza oven included), a home equity loan is a way to make your house more enjoyable while improving its value. But before you consider this option to get home equity for your home improvements, be sure to weigh the pros and cons of home equity loans fully.

3. Fund a Family Member’s Education

Today’s most lucrative careers take skills and training. Whether the goal is professional licensure in a trade like electricity, a graduate degree in law, or a certificate in comedy improv, there’s always a financial cost. In fact, a traditional four-year college education is more expensive than ever before. 

And that’s not to mention the rising cost of graduate degrees, continuing education courses, and certificate programs.

In some cases, student loans are an option. In others, you or your family member may need to take on personal debt (whether through credit cards or personal loans). You could even be tempted to dip into your retirement savings.

But your home equity provides another option:

  • home equity loan or cash-out refinance enables you to stay in your home while coming up with cash for tuition. Just make sure the interest rate is lower than the rate for student loans. In addition, come up with a plan for paying off this student loan debt.
  • You could also sell your home and convert that equity into liquidity. If you still want to own, try and downsize to a less expensive home.
  • Alternatively, you could take advantage of a sale-leaseback, offer to enjoy your cash and stay at your current home at a lower monthly rental rate.

4. Start a Business

What if you’ve already got the skills and training you need to start a successful business but are still lacking startup capital?

Refinancing and home equity loans are one potential solution. You can get access to cash at a relatively low-interest rate.

However, keep in mind that you’ll be adding to your debt burden. Businesses are an inherently risky venture, and if yours fails, you want to make sure your monthly payments are still within reach.

5. Emergency Costs

Sometimes, bad luck strikes. You might find yourself faced with a large bill like the following:

  • Vehicle damage
  • Medical bills
  • Legal costs from a lawsuit

Luckily, your home equity investment is there to help. Rather than putting the expense on a credit card, try taking out a home equity line of credit (HELOC) alternative. While your spending won’t be tax-deductible, you’ll pay significantly less over the life of the loan than you would otherwise.

6. Buy Another Property

You love your primary residence—but have you ever dreamed of owning a second home?

  • Buying a vacation home is an even more attractive option. Whether your dream is spending the winter skiing in Tahoe or sunning yourself on Martha’s Vineyard, who doesn’t want a retreat? It could even generate some rental income when you’re not there if you choose to make it a temporary rental property. Second homes come with tax breaks and affordable down payment options, as long as you can prove you spend half of your year there.
  • Investing in a rental property usually requires a higher down payment. However, it can generate monthly income that helps you pay off the mortgage as you gradually build equity in the home.

Many homeowners spend the majority of their savings on a first down payment, making a second property feel out-of-reach until a significant windfall comes their way. But there’s one thing they’re overlooking—the equity in their existing home.

If you’re wondering how to buy a second home with no down payment,  either a home equity loan or cash-out refinance could help you afford the downpayment on your next property. But a sale-leaseback allows you to convert your full home equity to cash, putting more money in your pocket. Talk to your bank to understand how much cash you could take out to afford a second property. 

7. Get Ready to Retire

When you’re saving up for retirement, it can feel like there’s a long road ahead. But if you want to enjoy your golden years sooner, your home’s equity gives you options:

  • You could secure a loan to make repairs so that your home is comfortable and cozy as you age.
  • If you’re over 62 and own your home, a reverse mortgage can empower you to take out cash against your home’s appraised value for the remainder of your lifetime. The repayment period will begin when you move out of your estate.
  • Another option is selling your home and either choosing to lease back, buy a new home, or rent a different property in your dream retirement locale.

How to Convert Home Equity

Now that we’ve walked you through how to use the equity in your home, all that’s left is choosing your method.

As we’ve explained, there are several options for accessing home equity, including:

  • Refinancing
  • Home equity loan
  • Reverse mortgage
  • Selling your home
  • Sale-leaseback

Which is the best for you? It all depends on your long-term financial needs. If you don’t mind maintaining or increasing your debt, loan options make it possible to access cash now and pay it off in the future.

Key Takeaways

If you’re ready to declare independence from your debt, a sale-leaseback is a unique way to stay in place while achieving leaps and bounds in your financial health. Talk to a financial advisor about your options to learn more about how our home equity loan and HELOC alternatives can convert your home equity to cash and drive your next step forward!

Home Equity
Tom Burchnell
Written by Tom Burchnell
Director of Product Marketing

This article is published for educational and informational purposes only. This article is not offered as advice and should not be relied on as such. This content is based on research and/or other relevant articles and contains trusted sources, but does not express the concerns of EasyKnock. Our goal at EasyKnock is to provide readers with up-to-date and objective resources on real estate and mortgage-related topics. Our content is written by experienced contributors in the finance and real-estate space and all articles undergo an in-depth review process. EasyKnock is not a debt collector, a collection agency, nor a credit counseling service company.