Cheapest Ways to Take Equity Out of Your Home: Home Equity Loan, HELOC, and More
Looking for the cheapest way to take equity out of your home? Learn which method fits your situation best, how fees add up, and what to avoid in 2025.
HELOC: What a Home Equity Line of Credit Means for You
Thinking about tapping the value of your home without selling it? A Home Equity Line of Credit, or HELOC, lets you borrow against that equity — kind of like a credit card that’s backed by your house. You draw money when you need it, pay interest only on what you use, and repay over time.
How a HELOC Works in Simple Steps
First, the lender checks how much equity you have. Usually they let you borrow up to 70‑80 % of that amount. Once approved, you get a revolving credit limit. You can pull cash, transfer to your bank, or even pay directly for home improvements.
Each month you get a statement showing the balance you’ve drawn, the interest rate, and the minimum payment. Most HELOCs have an interest‑only period (often 5‑10 years) where you only pay the interest. After that, you start paying down principal too.
When a HELOC Makes Sense
If you have a clear, short‑term need—like renovating a kitchen, consolidating high‑interest debt, or covering a one‑off expense—a HELOC can be cheaper than a personal loan. The interest rate is usually lower because the loan is secured against your home.
It also offers flexibility. Instead of taking a lump‑sum loan and paying interest on the whole amount, you only pay interest on what you actually use. That can save you money if you don’t need all the credit right away.
But it isn’t a free pass. Because your house is collateral, missing payments could lead to foreclosure. Also, rates can be variable, so your monthly cost might rise if the Bank of England changes its base rate.
Before you apply, compare the HELOC’s rate, fees, and repayment terms with other options like a lifetime mortgage or a standard home equity loan. A lifetime mortgage locks you into a fixed draw‑down amount and usually has a fixed rate, which can feel safer if you hate surprises.
Check your credit score, gather proof of income, and have a recent property valuation ready. Lenders will also look at your debt‑to‑income ratio—keep it under 40 % to improve approval odds.
Once you’re approved, treat the line of credit like any other revolving account. Track how much you draw, set a budget for repayment, and consider automating payments to stay ahead of the interest.
Remember, a HELOC is a tool, not a solution for chronic cash flow problems. Use it for planned projects or to bridge a short‑term gap, and have a clear plan to pay it back before the interest‑only period ends.
In short, a HELOC can give you cheap, flexible access to your home’s equity—if you respect the risk and keep an eye on the rate. Start by checking a few UK lenders, compare their offers, and decide whether the flexibility outweighs the potential cost.
How to Get Equity Out of Your Home Without Refinancing
Looking for cash but don't want the hassle of refinancing your home? There's good news—several ways let you tap your home's equity without starting a new mortgage. This article breaks down home equity loans, HELOCs, and shared equity agreements, and explains the pros and cons of each. You'll also get tips to avoid common pitfalls. Say goodbye to endless paperwork and rate shopping—here’s how to unlock your home's value on your own terms.