Four Ways You Can Use Your Home Equity
Four Ways You Can Use Your Home Equity
As a homeowner, it is highly likely that your equity has experienced substantial growth over the past few years. Over time, equity accumulates as home values increase and as you make payments towards your mortgage. The surge in home prices during the 'unicorn' years has probably resulted in more significant gains than you might realize.
According to the recent Equity Insights Report by CoreLogic, the average homeowner now possesses over $274,000 in equity. This substantial amount of equity can help you achieve various goals. As stated in a recent article by Bankrate:
"While the pandemic brought about serious challenges, homeowners were presented with a silver lining through substantial equity gains. Understanding how home equity functions and how to leverage it is crucial for any homeowner."
Now, let's explore a few examples of how you can make use of your home equity to your advantage.
1. Buy a Home That Fits Your Needs
If your current home no longer suits your needs, it might be a suitable moment to consider moving to a larger property. On the other hand, if you find yourself with excess space, downsizing to a smaller home could be the perfect solution. In either case, you can utilize your home equity to make a down payment on a new home that aligns with your evolving lifestyle. A real estate agent can assist you in determining the amount of equity you possess and guide you on how to leverage it effectively when purchasing your next home.
2. Reinvest in Your Current Home
If you're not ready to move but want to transform your living space, renovations present an excellent option. Home improvement projects allow you the flexibility to customize your home according to your needs and personal taste. However, it's crucial to also think about the long-term advantages that certain upgrades can bring to your home's value. To make informed decisions and get the maximum return on your investment when you decide to sell in the future, seeking guidance from a real estate professional is highly recommended. They can provide valuable advice on which improvement projects to prioritize for the best outcomes.
3. Pursue Personal Ambitions
Home equity can act as a catalyst for turning your long-held dreams into reality. Whether it involves investing in a new business venture, planning for retirement, or funding education, your equity can play a pivotal role. It is essential to use your equity responsibly and avoid unnecessary spending. However, utilizing it wisely for something meaningful and impactful can truly make a positive difference in your life.
4. Understand Your Options to Avoid Foreclosure
Currently, foreclosure filings are below average, indicating that there is no imminent risk of a flood of foreclosed homes entering the market. Nevertheless, some homeowners still go through the foreclosure process each year. If you find yourself facing financial difficulties, understanding your options and how your equity can assist you becomes crucial. Equity serves as a valuable financial resource that can act as a cushion during unexpected challenges or unforeseen circumstances that might hinder your ability to make timely mortgage payments.
Freddie Mac explains the concept of selling with equity as follows:
"If you decide that leaving your home is the best choice, selling with equity can be a viable option. This means selling your home at a price higher than the amount you owe on your mortgage, using the proceeds to pay off your remaining mortgage debt."
Having equity in your home can be a significant advantage when it comes to reinvesting in your needs, achieving your goals, and safeguarding against foreclosure during challenging times. If you're uncertain about the amount of equity you currently have, let's get in touch so you can begin strategizing your next steps.