Can I use equity in my house when I refinance my loan?

For example, if I owe $200,000 and I have $50,000 equity, when I refinance can I use the $50,000 to pay down the amount owed. The new load would then be for $150,000 and I would have $0 equity.

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  • 1 decade ago
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    No, your confusing yourself. Suppose your house is worth 250K and you have a loan for 200K.

    If you take out a 2nd loan using the 50K equity and use the money to pay down the 200K loan then yes your old loan is now just 150K but since you have a new loan for 50K you still owe 200K total. No matter how you slice it the only way to reduce your debt is to pay it down without taking out new debt.

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  • 1 decade ago

    In the example you gave, NO. Who would turn your equity into cash to pay off $50,000 of the loan? You'd need to borrow on your equity from someone else to do that, and that would screw up the deal because you won't be able to refinance if someone else has a superior lien on the house, and anyway you'd have two loans totalling $200,000 to pay off, so you're back to where you started. The equity by itself doesn't pay off anything if you refinance. It would only make a difference if you sell the house, which converts that equity to cash.

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  • 1 decade ago

    No,

    You can borrow against the equity in your home. If your home is worth 200K and you owe $150K, you could take a new loan for $200K and walk away with $50K in your pocket.

    Or you could get a home equity loan, which is a separate loan based on the equity in your home and use it to do anything you want. The interest on these loan is tax deductible. I have a home equity loan that I used to buy a motorcycle and a car.

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  • Anonymous
    1 decade ago

    Doesn't work that way. If you have a loan for $200k and have $50k equity, that means that the house is worth $250k. Since lenders like at least 20% equity, you are borrowed to the practicable limit already.

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  • Anonymous
    1 decade ago

    You can use the equity, esentially that is the portion of the home that you own. You will loose a little just cause that is how it works.

    The only thing you can't do is use the equity to pay fees wherever you refinance at.

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  • Anonymous
    1 decade ago

    if you refinance and take out a $50k equity loan (assuming your state allows that) you will then have a total lean against your home of $250k. after putting the $50k back towards the house you would then be right back at $200K.

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  • Anonymous
    1 decade ago

    usually you can't use more than 80% of your equity.

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