If you are a homeowner, you could have a lot of money at your fingertips without knowing how to utilize it. Your home’s equity is the value of your house minus any balances remaining on your mortgage. Even if you are still paying off your mortgage, you can tap into your home’s equity for a variety of reasons, even borrowing up to 80% of the home value. You might not have thought of using some of these ways.
Tuition for Your Kids’ Education
It is never too early to think about college for your children, especially since they are so expensive now. Having a high balance on your equity could mean you can pay for their educational expenses now. Getting an HELOC can keep your children from having to borrow so much money later on.
Consider Selling and Renting
If your home has a lot of equity, you could sell it and rent a place while keeping the rest of the cash. This can reduce maintenance and living expenses and give you a nice sum. If you are about to retire, this could be a great strategy since it would allow you to travel or enjoy other things besides maintenance. You could also sell your house but not actually move out. There are often leaseback options where you can lease your home from the buyer for a certain amount of time. This will help you enjoy your space without having to leave it.
Sell Your Current House
If you have high equity, you could sell your home for quite a bit of money. This can be a good option if your needs have changed. Selling could free you up to find something bigger or with different features to fit your family’s needs. You might have a growing family and need more space, or you may have started working remotely and find you want a nicer space to spend your time in. On the other hand, if you are nearing retirement or are now an empty nester, you might find you no longer need all that space and want something that doesn’t take as long to clean. This can reduce monthly expenses and help you round out your retirement savings. The current housing market means you are likely to maximize your value and get as much as possible for your space.
Make Some Improvements
The process of remodeling your home is often expensive, and you might not be able to fit these expenses into your everyday budget. That’s why using your equity is such a good idea. It allows you to unlock a lot of different possibilities that you might not have been able to consider in the past.
For example, you could refresh the kitchen by replacing counters, cabinets, and appliances. This renovation can add some value to the house. And you can also look into redoing the bathroom, which is another renovation that may add value. It’s also a good idea to think about redoing the exterior, which can increase the curb appeal. You can also make improvements or add additional space. For example, if you don’t sit outside on your back porch that much, you could enclose it in another room. Or you could put an addition onto the house, which could be used as an extra bedroom, a home office, or additional living space.
Purchase Another Home
You might find your current equity is enough to help you purchase a second property. Having another home is helpful if you often travel to a different part of the country regularly since it can save you money on accommodations and help you feel at home when you arrive. It can also be used as a vacation spot if you enjoy vacationing to the same area. It is also helpful for possible income opportunities. For example, you can post it on different short-term rental websites for vacationers to find. You can block out times you want to use it so it will always be available to you. And you can rent it on a longer-term basis to create a steadier stream of income. If the area you are considering is high growth, you could purchase a house there and resell it in a few years once it has increased in value. Flipping a house can take many forms, but many people purchase a fixer-upper to remodel and then sell.
Invest With the Funds
Your equity can also be used to purchase other investments, whether those are bonds, stocks, or different business ventures. There are lots of opportunities for investment when you have the funds to take advantage of opportunities that come your way. While there is no guarantee of a certain return on your investment, the possibilities are endless. No matter how you look at it, investing your equity can be a smart financial move.
Pay for Upcoming Large Purchases
Sometimes, it makes sense to get a personal loan or put something on a credit card, but with larger purchases, it might make more sense to use your equity to pay for it. You might use it to pay for a unique vacation, wedding, or a car. These are expensive things that might not have otherwise fit into your budget. Often, this method will give you more flexibility and usually has better interest rates than using a credit card or taking out a personal loan. Plus, there are often fewer limits on how much you are able to borrow.