It seems like everything is getting more expensive these days, but using the equity in your home may provide a less expensive way to combat rising prices. This article discusses what home equity is and ways it can be utilized to your advantage.
What is home equity?
Equity represents the difference between the current market value of your property and the outstanding balance on your mortgage. With home values still well above what they were pre-pandemic, many homeowners have equity available to use. Here are some common ways to utilize your home’s equity:
Home Improvement
Using equity is a great way to upgrade your home, including renovations to your kitchen, bathroom, or basement. These upgrades can also increase the overall value of your property, making it more attractive to potential buyers if you decide to sell your home in the future.
Debt Consolidation
This option is great if you have high-interest debt, such as credit card balances or personal loans. By consolidating these debts into one, lower-interest mortgage payment, you can reduce your overall debt load and pay much less in interest, saving you money.
Education Expenses
Paying for college tuition or a trade school with home equity is a good option because the interest rates on home equity loans are typically lower than those on student loans, and the repayment terms are more flexible.
Retirement Income
Using a reverse mortgage allows you to borrow against the equity in your home without having to make monthly payments. Instead, the loan is repaid when the home is sold or the homeowner passes away. This can be a useful option for seniors who need extra cash to cover living expenses or healthcare costs during their retirement years.
Of course, there are risks that come with using your home’s equity. If property values decline, you could find yourself owing more than your home is worth. Additionally, there may be tax implications.
Our mortgage experts are ready to answer any questions you may have, and work with you to find the best solution to your unique situation.