Leverage Your Home Equity

One of the many perks of homeownership is watching your equity grow — and, as a result, your overall wealth. Used wisely, the equity you have built in your home can be a valuable financial tool.

Read on to explore my top three creative strategies to leverage your home equity. 

Home equity is the difference between how much your home is worth and how much you owe on your mortgage.

While It’s always important to make responsible borrowing decisions, there are times when, compared to interest rates on other types of loans, tapping into your home’s equity can make a lot of sense.

1. RENOVATE

Invest in upgrades that elevate your living space.

Whether it's a kitchen renovation, bathroom remodel, adding an addition, or even replacing the roof or the HVAC system — enhancing your home's functionality can also boost its market value. If you're planning home improvement projects and would like my thoughts on how they'll impact your home's value, send me a message!

2. CREATE PASSIVE INCOME THROUGH INVESTMENTS

Looking to move into a larger home but don't want to say goodbye to your current property?

Tap into your equity to use as your downpayment for the new home, then rent out your current home for an additional income stream. OR leverage your equity to purchase an investment property — whether it's a rental property, vacation home, or a flip, this can be a strategic way to diversify your investments.

3. CONSOLIDATE DEBT

Are medical expenses weighing you down?

Is college tuition stressing you out?

You can streamline your finances using home equity to consolidate high-interest debts, like credit card balances, or pay off medical expenses or college tuition bills. This can lead to lower overall interest payments and a clearer path to financial freedom.

4. SIT TIGHT & LET YOUR EQUITY GROW

You don’t have to touch your home equity! If you don’t need to tap into it, then you shouldn’t. Continue making your monthly payments, and you will watch your equity grow as you pay down your mortgage. Plus, when your home’s value rises because of market conditions (and appreciation), you gain equity without having to do anything at all.

HOME EQUITY VS. HELOC (Which one is right for you?)

Home Equity Loan

  • You receive a lump sum using your equity as collateral
  • Fixed interest rate
  • Ideal if you need a specific amount all at once

HELOC

  • Works like a credit card - you can take what you need as you need it
  • Initially, you only pay interest on the amount you borrow. Then, after the “draw” period (a set term, usually 10 years), you start repaying the principal and interest
  • Variable interest rate after the draw period

Before making any decisions, it's important to consult a financial professional who can help you evaluate your goals, understand the associated risks, and determine the potential benefits of tapping into your home equity.

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