HOME EQUITY HAS HIT A RECORD HIGH
With favorable appreciation levels the past couple of years, you may be sitting on more money than you think! In this week’s episode, I’m going to break down some of my favorite tips and tricks on accessing your home’s equity and the best ways to put it to use.
UNLOCKING YOUR HOME’S EQUITY
The simplest way to unlock equity from your home is to sell it and take the proceeds from the sale after all transactional costs have been paid (Escrow, title, commission, etc.). However, not everyone is in a position to sell or they simply don’t want to. The good news is, there are additional options such as a cash out refinance and a Home Equity Line of Credit (HELOC) that allow you to access this equity without having to move or sell.
A cash out refinance is ideal if you have been living in the home for at least six months to a year. Interest rates are usually higher for this type of refinance so this isn’t the path I would recommend unless you absolutely have to. This is especially important to consider if you have a low interest rate on your current mortgage.
A HELOC allows you to borrow against the available equity on your home and the house is used as collateral for the line of credit. You can then spend these funds basically like a credit card. This is a great option for a short term investment where you’re confident you can pay it back.
HOW TO PUT YOUR EQUITY TO GOOD USE
Once you have taken out equity, it’s important that it’s utilized in the most profitable way in order to maximize the return. Instead of putting this money towards a brand new boat or a luxury car, both depreciating assets (no judgment if that’s what you want to do), reinvest the money back into your home by remodeling the property. If done correctly, you will make the money back because you will have greatly increased the value of the property. Another great strategy for utilizing your equity is to use it as a down payment on an investment property. I have personally done this and purchased a multi -family with a HELOC, renovated the property, and then refinanced to pay off the HELOC and it was extremely profitable.
We hope you enjoyed this article!
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