Education Center

Unlocking Your Home’s Equity

Todd Nerlinger

Are you interested in unlocking the equity in your home but unsure about the best way to do so? The equity in your home could be used for a variety of reasons, including home upgrades, an addition, education expenses, debt consolidation, or even to provide a down payment to purchase a second home or investment property. There are three main ways to unlock the equity in your home:

  1. Home Equity Line of Credit (also known as a HELOC)
  2. Second mortgage
  3. Cash-out refinance

There are certain circumstances, goals, and objectives that may make one option more suitable than another for your needs.

Option 1: Home Equity Line of Credit

A Home Equity Line of Credit is great when you want to have access to the equity to move quickly on an opportunity or access funds in an emergency situation. This may be more suitable when the need for the funds is short-term, and you may even want to have access to the funds again after paying the amount down or off.

Some examples are:

  • Buying a car where you may get a better deal by paying cash with HELOC proceeds or when the rate on a HELOC may be lower than the car loan amount.
  • Replacing a failed HVAC system in the middle of the winter or summer.
  • Dealing with unexpected medical bills from an injury or illness.

One great feature of a HELOC is that you pay interest only on a per-day basis based on how much you’ve drawn out on your HELOC at a given time. However, if you have a balance, you’ll want to pay extra against the principal to make progress in paying it down.

Keep in mind:

  • The interest rate is variable and can go up and down with the prime rate, and there are no closing costs.
  • The loan term is typically ten years or more depending on the lender, so you’d need to pay off, refinance, or renew the loan at that point.
  • There’s typically an annual fee, which may be waived in year one, and some lenders have an early closeout fee if closed within the first three years to recover costs.

Option 2: A Second Mortgage

A second mortgage is a great option to unlock equity when you have a defined long-term use for the funds and may only need a small- to medium-size amount. Presently, many people have favorable rates and terms on a current first mortgage and may prefer to keep that mortgage in place rather than refinance the loan.

Keep in mind:

  • The second mortgage rate is able to be locked in for an initial fixed period, eliminating some of the uncertainty of what future interest rates may rise to during that period.
  • Unlike a HELOC which is interest only, a second mortgage is a fully amortizing loan, so the payment consists of principal and interest.
  • Variable-rate second mortgages sometimes have loan caps, which limit how high the rate can go.
  • Second mortgage proceeds can be used for a variety of reasons, but some common ones are for debt consolidation and for use as a down payment for a second home.

 Option 3: Cash-Out Refinance

The third way to unlock equity in your home is through a cash-out refinance on a first mortgage. Many people prefer this option because of the simplicity of wrapping up the cash proceed needs and the current loan or loans they have into one convenient payment.

Keep in mind:

  • This option is ideal for freeing up larger amounts of equity, where having a large balance on a HELOC could bring uncertainty to future payments due to interest-rate fluctuations.
  • It also typically has the lowest interest-rate options of the three solutions since it’s a new first mortgage.
  • Unlocking your equity is possible through many different financing vehicles.


It’s important to discuss your needs and situation with your loan professional to come up with a solution that works best for you. For more information, you can reach me by phone or email with the contact info below.

Todd Nerlinger
Vice President, Sales
Union Savings Bank

Phone: (937) 271-6305
Email: [email protected]

NMLS# 641549

Written by Todd Nerlinger

Todd has helped thousands of homeowners buy or refinance their mortgage since 2006. He’s passionate about understanding each client’s personal situation and coming up with a mortgage solution that best suits their needs. He resides in Dayton, OH, with his wife and family.

All home lending products are subject to credit and property approval. Rates, program terms and conditions are subject to change without notice. Other restrictions and limitations apply.
These articles are for educational purposes only and provide general mortgage information. Products, services, processes and lending criteria described in these articles may differe from those available through Union Savings Bank. For more information on available products and services, and to discuss your options, please contact a Union Savings Bank loan officer.