Equity Takeout

AAA

DEFINITION of 'Equity Takeout'

Taking money out of a property to use for a variety of purposes. Equity takeout allows homeowners to tap into the equity of their home. When an equity takeout is done on your home, the principal on the value of the mortgage will increase, if there is an existing mortgage on the property. If you don't have a mortgage, you are borrowing against the property.


This mortgage is available in two forms: the traditional fixed rate mortgage or a variable line of credit option. The main difference between the fixed and variable types is that the traditional fixed provides stable interest rates for a predetermined period of time and has limited prepayment options. The variable line has a fluctuating interest rate and flexible prepayment options. A equity takeout is also referred to as an equity takeout mortgage.

BREAKING DOWN 'Equity Takeout'

Homeowners take money out of their property for different reasons including investment in other real estate properties, stocks or equities, and purchase of properties that are considered recreational such as cottage or vacation homes. Other purposes include using the money to cover tuition fees, home renovations or startup business costs.

RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Equity Stripping

    The process of reducing the overall equity in a property in order ...
  4. Mortgage Insurance

    An insurance policy that protects a mortgage lender or title ...
  5. Home Equity Line Of Credit - HELOC

    A line of credit extended to a homeowner that uses the borrower's ...
  6. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
Related Articles
  1. Credit & Loans

    Mortgage Points: What's The Point?

    Learn how to pay less for your home in the long run, or save in the short run.
  2. Home & Auto

    How To Analyze Real Estate Investment Trusts

    REITs are much like dividend-paying companies, but analyzing them requires consideration of the accounting treatment of property.
  3. Options & Futures

    Home-Equity Loans: What You Need To Know

    We shed light on why consumers decide to use this form of debt and whether it is a good alternative.
  4. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  5. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  6. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  7. Savings

    7 Ways To Recession-Proof Your Life

    Find out what you can do to prepare and cope in tough economic times.
  8. Credit & Loans

    Protect Yourself From HELOC Fraud

    Identity thieves are using home equity lines of credit to commit their crimes.
  9. Options & Futures

    The Reverse Mortgage: A Retirement Tool

    Discover another way to fund your retirement without having to make payments on a loan.
  10. Credit & Loans

    5 Signs a Reverse Mortgage Is a Bad Idea

    Here are the key situations when you should probably pass on this type of home loan.
RELATED FAQS
  1. How do I calculate how much home equity I have?

    Even though it is normally assumed most people know their home equity, many are still confused about the topic. It is an ... Read Full Answer >>
  2. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  3. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  4. What are the typical requirements to qualify for closed end credit?

    Typical requirements for a consumer to qualify for closed-end credit include satisfactory income level and credit history, ... Read Full Answer >>
  5. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  6. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!