If you are a home owner you will have been paying off your capital and interest mortgage year on year, resulting in a sum of money being locked into your property. The great thing is that you can access this money in a number of different ways.

Not only are there a number of ways in which you can access the money, there are no restrictions on how you choose to spend the money. If you are thinking of buying that dream car, taking a family holiday or simply reinvesting the money into some home improvement works, the choice is yours.

Image Courtesy of Simon Cunningham

Image Courtesy of Simon Cunningham

Here are the four ways in which you can use your property to access funds:

Reverse mortgages

A reverse mortgage tends to be aimed at senior citizens, and allows you to tap into the equity built up in the property. They are unlike typical loans as there are no monthly repayments of any kind. Instead payment of the loan is paid upon transfer of home ownership, failure to keep the home in good repair, failure to pay taxes or insurance or upon the homeowner’s death.

One of the great benefits of the reverse mortgage is that it allows you to stay in your home and access the equity that you have built up over time.

Refinancing your home

This is a great finance option, if you plan to stay living in your home for a prolonged period of time. Just as the name suggests, this is where you ‘refinance’ your home against an agreed interest rate with the lender. If the interest rate is favourable, there is a good chance that your payments will be less, which will free up some cash.

Another great benefit of refinancing your home is that it remains an asset for both you and your heirs.

Equity loans or line of credit

These types of loans will give you access to a lump-sum payment that you pay back over an agreed period of monthly instalments. The period of time in which this loan can be paid back varies from lender to lender, and agreement to agreement, but it is flexible enough to fit in with your financial circumstances.

As most equity loans are secured against your property, your home is at risk if you do not keep up with the agreed repayments.

Sell your home to a third party

With the first three options above, you get access to the equity you have built up and you get to stay in your home. For some people, this just isn’t practical. There are a number of good reasons to sell your home; if you have outgrown it, or need to down-size, or your home has simply become too costly for you to run. If you do decide to sell your home, you will have access to the equity you have built up on it. How you choose to use that equity is then entirely up to you.

My Say

Whichever way you decide to access the equity built up in your home, do some research into all the options available to you and pick a method that is right for you. There are accompanying responsibilities for each to ensure that you do not find yourself in the losing end. Failure to comply with financial and other agreed responsibilities have dire consequences. Make sure you fully understand the terms and conditions of any agreement you enter into.