If you’ve built equity in your home, now may be a great time to use it! You earn equity by making your regular mortgage payments as well as when your home appreciates. Equity is the difference between your home’s value and how much you owe on your mortgage.
You are free to use your home’s equity how you want. Some people leave it, saving the money for retirement or their estate. Others, though, use their home equity to their advantage.
If you have equity in your home, here are 5 reasons to use it today.
1. Improve your Home
Investing your money back into your home is the best way to use your home’s equity. You borrow the money only to improve your home’s value, earning the equity back rather quickly.
Not all improvements give you a dollar-for-dollar return on your investment, but even a small percentage back will give you a return on your investment.
2. Consolidate Debt
Interest rates are on the rise, which means consumer rates are too. It’s nearly impossible to beat the interest rates you pay on credit card debt with any investments. Instead, you should pay your credit card debt off and consider it an investment in yourself.
When you refinance using your home’s equity, you wrap your credit card debt into one loan with a rate lower than most credit cards charge.
3. Build an Emergency Fund
If you don’t have an emergency fund, tapping into your home’s equity can help. You don’t have to use the funds if you don’t need them, but knowing they are there can provide peace of mind. Since it takes time to close a home equity loan or a refinance of your first mortgage, you can take the funds out now and keep them somewhere safe.
Some people withdraw the funds and invest them or put them in a CD, so they don’t use the funds for anything except true emergencies.
4. Pay Large Expenses
If you have a large expense and need a loan to pay for it, use your home’s equity. Most people get a lower interest rate than they would on an unsecured personal loan, so they save money. You also have the collateral of the home to make the loan easier to get since without collateral banks have nothing to fall back on.
5. Start a Business
Starting a business requires capital and most new businesses can’t get a loan. If you tap into your home’s equity, though, you can have the capital to get started. You’ll pay a lower interest rate than you would on most other loans and know that you have the necessary funds to get started.
Your home equity doesn’t have to just ‘sit there.’ You can use it for just about any purpose. At Save Financial, we help borrowers every day find the loan that helps them use their home equity to their advantage.
The key is to determine your reason for using your home equity and sticking to it. You’ll have the funds you need for your goal and will spend less doing it when you work with a reputable broker like Save Financial.