You Can Use Your Home Equity to Do…That?
Buying a home has its obvious rewards. Maybe less obvious are the myriad ways to tap into the equity you’ve built to fund your goals.
There are essentially two ways to tap into your equity: borrowing or sharing.
Homeowners can borrow against their equity via a home equity loan or a home equity line of credit (HELOC). However, these financing options do have a few drawbacks. For starters, both include the obligation to pay back the amount borrowed with interest and other fees.
Alternatively, equity sharing, like a Hometap Investment, provides homeowners the flexibility to invest their wealth in more areas of their lives—not just in their homes. Hometap Investments offer no monthly payments, interest, or fees.
Whether you opt for a home equity loan, HELOC, or Hometap Investment, here are four ways you can use that wealth to do what you really want.
1. Consolidate debt
Credit card debt weighs heavily on many Americans with average interest rates at 15%. That’s why a home equity loan with interest rates as low as 5% is so attractive. Use funds from your home equity loan to consolidate that credit card debt and significantly improve your financial posture.
2. Pay for school
The cost of education has skyrocketed. But investing in your education or your children’s education provides lifelong returns. Private education loans may seem like a solid bet but they often have higher interest rates than a home equity loan. Plus, you can use your home equity funds to pay for college or offset the burden of student debt.
3. Renovate your home
Build your dream kitchen. Renovate the unfinished basement. Add that party patio you’ve wanted. Home improvements are like a double rainbow. Not only do they provide instant gratification to the present homeowner but also that remodel can result in a profit when you sell, according to LendingTree.
4. Buy a second home
If you’re excited to add property to your portfolio, tapping into your home equity makes a lot of sense. Whether you’re considering a vacation home or investment property, home equity loans have lower rates comparatively to other types of loans like a second mortgage. As with any investment, you should familiarize yourself with the pros and cons of using your home equity to fund a second home.
Invest in you
Why wait to sell your home to access the equity you’ve accrued? Accessing your home equity now allows you to invest in your present and future happiness, whether that’s achieving your financial goals faster or realizing a life goal that can also help improve your financial future.
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The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.