Home Equity Products Compared
| Product | Type | Rate | Good For |
|---|---|---|---|
| HELOC | Revolving line | Variable (Prime + 1-2%) | Ongoing expenses, flexibility |
| Home Equity Loan | Lump sum | Fixed (6-9%) | Large one-time projects |
| Cash-Out Refi | New mortgage | Fixed | Large amounts, lower rate |
Why the 80% LTV Threshold Matters
At 80% LTV (20% equity), three things happen. First, PMI (private mortgage insurance) is no longer required — saving $100-300/month on a typical loan. Second, you qualify for the best refinance and HELOC rates. Third, you have meaningful protection against a market downturn. A 15% drop in home values still leaves you above water. After the 2008 crisis, homeowners with less than 10% equity were 3× more likely to face foreclosure than those with 20%+.
Ways to Build Equity Faster
Make one extra mortgage payment per year — on a 30-year, $300,000 loan at 7%, this shaves 4-5 years off and saves roughly $90,000 in interest. Biweekly payments achieve the same effect automatically (26 half-payments = 13 full payments). Home improvements with the highest ROI: kitchen remodel (60-80% recoup), bathroom update (55-70%), new roof (55-65%), and curb appeal work like a new front door or fresh paint.