Four Ways to Use Your Home Equity
If you own a home, your equity has most likely increased dramatically in recent years. Equity accumulates over time as home values rise and mortgage payments are made. And, because property prices rose throughout the 'unicorn' years, you've probably made more money than you realize.
According to the latest Equity Insights Report from CoreLogic, the average homeowner has more than $274,000 in equity right now. That much equity can help you achieve certain goals. In a recent article, Bankrate elaborates:
“While the pandemic created serious challenges, the silver lining for anyone who owned a home was the sizable equity gain. Understanding how home equity works, and how to leverage it, is important for any homeowner.”
Here are a few examples of how you can put your home equity to work for you.
1. Buy a Home That Fits Your Needs
If your current living situation no longer fulfills your needs, it may be time to consider relocating to a larger home. If you have too much space, downsizing to a smaller home may be ideal. In any case, you can use your equity to put down money on a home that fits your changing lifestyle. A real estate agent can assist you in determining how much equity you have and how to use it when purchasing your next house.
2. Reinvest in Your Current Home
Renovations are a great option if you want to change your living space but aren’t yet ready to make a move. Home improvement projects give you the freedom to tailor your home to match your needs and personal style. But it's important to consider the long-term benefits certain upgrades can bring to your home’s value. Lean on a real estate professional for the best advice on which improvement projects to prioritize in order to get the greatest return on your investment when you sell later on.
3. Pursue Personal Ambitions
Home equity can also serve as a catalyst for realizing your life-long dreams. That could mean investing in a new business venture, retiring, or funding an education. While you shouldn’t use your equity for unnecessary spending, using it responsibly for something meaningful and impactful can really make a difference in your life.
4. Understand Your Options to Avoid Foreclosure
Today's foreclosure filings remain below average, so there's no reason to worry about a deluge of foreclosed properties flooding the market. Unfortunately, some homeowners still go through the foreclosure process each year. If you're suffering from financial issues, it's critical to understand your options and how your equity might help. Equity can serve as a financial cushion in the event of unexpected obstacles or unforeseen situations that interfere with your capacity to make mortgage payments on schedule.
In an article, Freddie Mac explains it this way:
“If exiting your home is the best option for you, selling with equity may be a good option. When selling with equity, you are using the proceeds from selling your home at a higher price than the amount you owe on your mortgage to pay off your remaining mortgage debt.”
Your equity can be a game changer when it comes to reinvesting in your necessities, chasing your dreams, and even avoiding foreclosure during bad times. Let's connect if you're wondering how much equity you have in your property so you can start planning your next move.