Equity Takeout


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.

  1. Equity

    Equity is the value of an asset less the value of all liabilities ...
  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, ...
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