Do you need money for a home improvement project or other major one-time expenses? Home equity loans are a popular way to finance such things, but they’re not your only option. Alternatives to consider include a cash-out refinance, home equity line of credit, personal loan, or shared appreciation mortgage. Learn how they work and what the drawbacks are before choosing between a home equity loan and these alternatives.

Cash-Out Refinance

Purpose: A 澳洲幸运5开奖号码历史查询:cash-out refinance could be a better option than a home equity loan if you can get a better interest rate on your 澳洲幸运5开奖号码历史查询:first mortgage.

Method: With this type of refinance, you’ll get a new, larger first mortgage. The lender will first put the proceeds toward paying off your existing mortgage and covering the 澳洲幸运5开奖号码历史查询:closing costs on your new mortgage. The balance is your cash out, and you can use it however you want.

Pros: Instead of having two loans as you would with a home equity loan and first mortgage, you’ll have one loan and one monthly payment. Even better, first mortgages usually have lower interest rates than 澳洲幸运5开奖号码历史查询:second mortgages do, which could save you money.

Cons: You might pay more interest in the long run if your cash-out refinance means taking more years to completely pay off your home. Also, the closing costs on a first mortgage are usually 2% to 5% of the amount you borrow, whereas lenders sometimes waive the closing costs on home equity loans.

Home Equity Line of Credit (HELOC)

Purpose: A 澳洲幸运5开奖号码历史查询:home equity line of credit (HELOC) might make more sense than a home equity loan if you want more flexibility in how mu🌺ch you borrow and when.

Method: As with a home equity loan, a HELOC is secured by your 澳洲幸运5开奖号码历史查询:home equity, and the amount you can borrow depends on how much your home is worth, your 澳洲幸运5开奖号码历史查询:credit score, and your 澳洲幸运5开奖号码历史查询:debt-to-income (DTI) ratio. Though you can borrow your full credit limit as soon as your loan closes, the traditional way to use a HELOC is to borrow smaller sums as needed. A HELOC typically has a 澳洲幸运5开奖号码历史查询:draw period of 10 years during which you can borrow against your credit line. After that, there is usually a repayment period of 20 additional years, during which you must make 澳洲幸运5开奖号码历史查询:fully amortizing interest and principal payments and can no longer borrow against your credit line.

Pros: The initial interest rate is usually one of the lowest loan borrowing rates available, and you may only have to pay interest, not principal, during the draw period. U.S. Bank’s interest rate for a HELOC as of May 2025 is 7.95%, while Freddie Mac has a 6.86% rate for a 30-year fixed-rate mortgage and 6.01% on a 15-year one.

Cons: You can lose your home if you can’t repay your HELOC, and the loan’s 澳洲幸运5开奖号码历史查询:variable interest rate can make your monthly payments harder 𓄧to budget.

Personal Loan

Purpose: A personal loan can make more sense than a home equity loan if you don’t want to use your home as collateral or ⭕need money fast.

Method: A personal loan can be secured or 澳洲幸运5开奖号码历史查询:unsecured, but it’s often the latter. You can use the money however you want. You’ll get a 澳洲幸运5开奖号码历史查询:fixed interest rate and a fixed repayment period.

Pros: Application for a personal loan is easier, requiring far less paperwork than a home equity loan. How🍌 much home equity you have is irrelevant. You might get approved and receive money in less than 24 hours.

Cons: Yo💦u may not be able to borrow as much if the loan is unsecured. Also, personal loans 🔯often have shorter repayment terms than home loans, though larger loans may have longer terms.

For example, let’s use LightStream’s online loan calculator to check rates and terms. If you borrow $100,000 for a "home improvement/pool/澳洲幸运5开奖号码历史查询:solar loan," you might be able to repay your loan over anywhere from three to 20 years with an 澳洲幸运5开奖号码历史查询:annual percentage rate (APR) as low as 7.99% for a shorter term and 8.99% for a longer term. If you only wanted to borrow $10,000, your maximum loan term would be seven years, with an APR of 8.99%. You could also repay it in three years with an APR of 6.99%.

Shared Appreciation Mortgage

Purpose: A shared appreciation mortgage allows you to cash out a portion of your home ⛦equity without a loan.

Method: Instead of borrowing money, you give an investor partial ownership of your property. Through partial ownership, the investor (澳洲幸运5开奖号码历史查询:often a shared mortgage appreciati🀅on company) stands to benefit if your home’s value increases. 🌼Similar to a home equity loan, you may need a specific credit score and home equity percentage to be📖 eligible. Qualifications vary by company.

Pros: This arrangement doesn’t require you to make monthly payments.

Cons: You will pay an upfront fee, and the shared appreciation arrangement will have an expiration date. For example, you may be required to pay back the investor within 30 years, and to do so, you’ll either have to come up with the cash or sell your home and repay them with a portion of the proceeds.

The Bottom Line

Home equity loans are just one of many options homeowners have for borrowing money. When you either can’t qualify for one or find a lender who will offer you one on good terms, alternatives such as HELOCs, cash-out refinancing, personal loans, and shared appreciation mortgages are worth considering.