How to borrow $100,000 worth of home equity without refinancing
Borrowing money can be relatively easy. But borrowing a large amount of money can be difficult. And borrowing a large, six-figure sum of money can be even more problematic, particularly when using unsecured forms, like personal loans or credit cards. Just think about how hard it was to secure your current credit card line. Now imagine what would need to happen to secure a card with a limit of, say, $100,000.
Fortunately, homeowners don't have these same concerns, as their home equity can easily provide them with a six-figure amount of funding to utilize. And that could be way above that $100,000 mark, thanks to the average homeowner having around $313,000 worth of equity to utilize, according to data released in March. Still, borrowing from your home equity needs to be done strategically to avoid having the home foreclosed on by the lender. So a cash-out refinance or even a traditional refinance loan won't be beneficial in today's still-elevated rate climate, as both would require homeowners to exchange their current mortgage rates for what are likely to be much higher ones.
But there are alternative methods in which homeowners can borrow $100,000 worth of home equity without having to refinance. Below, we'll detail three of them.
Start by seeing how much home equity you could borrow here now.
How to borrow $100,000 worth of home equity without refinancing
Here are three ways homeowners can borrow $100,000 worth of home equity now without having to refinance their existing mortgage rate:
Home equity loans
Home equity loans will give homeowners $100,000 in a lump sum, should they meet some basic eligibility requirements. Payments will need to be remade immediately, with loan terms frequently being 10 or 15 years. But home equity loan interest rates have declined over the past year and are now materially lower than personal loan and credit card rates, making it one of the more cost-effective borrowing options for homeowners.
And $100,000 home equity loan monthly payments are affordable, too, coming in around $1,200 per month or lower, depending on the repayment period. If used for qualifying home repairs and renovations, borrowers can even deduct the interest paid on the loan from their taxes for the year in which the funds were used.
Get started with a home equity loan online today.
Home equity lines of credit (HELOCs)
A HELOC functions similarly to a home equity loan, but it comes as a revolving line of credit, not in one lump sum. But that can be an advantage when withdrawing $100,000 as you'll only have make payments on the amount utilized, not the full line of credit you've been approved for. And, unlike home equity loans, you can make interest-only payments during the draw period (which can last up to 10 years), giving you an even easier way to borrow $100,000 without having to refinance.
HELOCs also have the same tax deduction benefits that home equity loans do, making them a smart way to finance spring home projects this year. And, right now, at around 8%, they have some of the lowest interest rates on the market across borrowing products. With a variable interest rate subject to change monthly, that rate could drop in the months to come if the interest rate climate continues to cool, too.
Reverse mortgage
A reverse mortgage may only be available for homeowners age 62 and older (with some exceptions), but it's a bit more versatile for senior homeowners. That's because the $100,000 can come in various forms – a lump sum like a home equity loan, a line of credit like a HELOC or predetermined monthly payments.
The home equity is utilized similarly to the latter two options, but in this scenario, repayments won't be required as the lender will "reverse" the typical transaction structure and instead pay the homeowner directly. The $100,000 will need to be repaid, however, if the homeowner dies or if the home is sold. That said, this could be the optimal way for older homeowners to borrow $100,000 without having to refinance and without having to worry about making monthly payments back to the lender.
Explore your reverse mortgage options here.
The bottom line
Borrowing $100,000 shouldn't be done recklessly, particularly when the funding source is your own home. But it can be done in a cost-effective manner, particularly if you're looking to avoid refinancing in today's still hard-to-predict rate climate. By exploring your home equity loan, HELOC and reverse mortgage options you can better determine which makes the most sense for your financial situation both now and in the future and, most importantly, you won't need to rearrange the mortgage rate circumstances that's successfully resulted in you having a large, six-figure sum of equity to borrow from.
