I have this question: Let's say I bought a house for $100k.

Now after 5 years the value of the house went up from $100k to $150k. Can I go to the bank and ask for the additional $50k added to the mortgage(which increases my monthly payments) and the bank will give me $50k in cash? Which adds up to my savings.

  • 2
    Search the Internet for phrases such as "Home Equity Line of Credit" and "Refinance my mortgage" Jan 27 '16 at 13:53
  • @DilipSarwate is HELOC a private business or is it part of every bank?
    – Grasper
    Jan 27 '16 at 13:57
  • 7
    Just to be clear, borrowing money is not the same as making money. Jan 27 '16 at 13:58
  • 2
    @Grasper HELOC is not a company. It is a type of loan that most banks offer. Jan 27 '16 at 14:09
  • Note that if your property value went up by $50000, you would usually be able to borrow against 80% of the increase in equity unless you pay Mortgage Insurance.
    – user9822
    Jan 27 '16 at 20:12

Yes. You can request for additional loan and it would be given as cash. You are free to do whatever you like with it.

This does not mean Bank will automatically grant you loan. They would ask you purpose, check your ability to make additional repayments, verify if the property has actually appreciated before deciding.

Note this is not savings. This makes sense only if you can generate returns greater than the cost of loan.

  • 3
    Remodeling rarely produces a profit.
    – keshlam
    Jan 27 '16 at 14:37
  • 1
    @keshlam, I know people I lived with. They bought a house in UK for $100k, invested $50k in remodeling and sold for $500K. No kidding. They did it 8 times like this.
    – Grasper
    Jan 27 '16 at 16:21
  • 3
    the value of your home has no meaning, when you're not willing to sell. You're just spending money for a fancier place. Which is ok, just don't justify it with investment returns
    – Christian
    Jan 27 '16 at 17:10
  • 1
    @keshlam, just because something doesn't work for you does not mean it doesn't work for others that do it properly!
    – user9822
    Jan 27 '16 at 20:09
  • 2
    @MarkDoony: Real estate industry statistics strongly argue that most renovations cost more than they will return, unless they are gut-rehabs of property that was bought cheap or that has unusually high land value. There ate exceptions, but the near-universal recommendation is to renovate only because it's cheaper than moving to get what you want.
    – keshlam
    Jan 27 '16 at 21:42

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