If you're a homeowner, you may be wondering how you can use your home equity to your advantage. Home equity is the portion of your home's value that you actually own - that is, the part that you've paid for with your own money. (the rest is made up of the amount you still owe on your mortgage). Because home equity represents a portion of your investment in your home, it can be a valuable asset. Take note though, per federal legislation you can’t access any of that equity until you have at least 20% of it available. That means you can’t refinance and borrow more than a total of 80% of the current market value of your home. Here are 3 ways you can use your home equity to your advantage
One of the most popular reasons to tap into your home equity is to make improvements to your property. Not only will this increase the value of your home, but it can also make it more comfortable and efficient. Common projects include adding or renovating bedrooms, bathrooms, and kitchens; finishing a basement; and making energy-saving improvements like installing solar panels or upgrading insulation.
Another popular use for home equity is to pay down high-interest debt, such as credit card debt or student loans. Because the interest rate on a home equity loan is usually lower than the rate on other types of loans, using home equity to pay down debt can help you save money in the long run. This approach can also help you get out of debt more quickly, as you'll have more money each month to put toward principal payments.
For some people, using home equity to buy a second property—whether it's an investment property or a vacation home—can be a smart move. Not only will this give you another asset that could potentially appreciate in value, but it will also provide you with a place to stay when you're traveling or generate rental income when you're not using it yourself. Before taking this step, though, be sure to carefully consider whether you're prepared to take on the responsibilities of being a landlord or second-homeowner.
If you’re interested in using your home equity, call me any time at 403-894-8836