3 Ways To Capitalize On The Equity In Your Home

Over the past several years home values have risen dramatically. This means that even though your home is worth a set amount in terms of how much you have left to pay off your mortgage, it is actually worth more if the home is reevaluated to either sell it or take out a loan against it. For example, if you purchased your home 5 years ago for $100,000 and put down $20,000 as a 20% down payment then you started off with $20,000 of equity in your home. Lets say that over the course of the 5 years between then and now you gained an additional 5% equity by paying your monthly mortgage payment. You now have $25,000 in equity in your home. But another factor to consider is that over those 5 years the average sale price in your neighborhood went from $100,000 to $150,000. You just earned an additional $50,000 through appreciation as the value in your home rose. Because of this, you now have $75,000 in equity in your home that you can potentially take advantage of. If you are looking for ways to put that money to work for you, here are 3 potential options:

1. Refinance your home so that you can cash out a portion of that $75,000 in equity. You will be able to get an exact amount that you are eligible to pull out by speaking with your mortgage lender, but this is money that you can pull to use for other things. One thing to keep in mind is that refinancing will change the interest rate that you are paying for the loan, so be sure to discuss this with your lender. A common strategy used by the financially savvy is to take this money and use it as a downpayment on a second home to rent out as an investment property. By doing this you would be purchasing an asset that generates passive income without having to spend money out of pocket to purchase a home. 

2. Refinance your home so that you can use the money to improve your home. This is useful in situations where a homeowner wants a nicer home but does not want to move or cannot find a nicer home that is affordable for them. You can take the money from the refinance and upgrade your home to the level that you want. 

3. Sell your home to move to a nicer home or downsize to one with less maintenance. With the proceeds from the sale you now have enough money to place a sizable down payment on a home that meets your needs or is an upgrade. 

If this has sparked an interest in capitalizing on the equity in your home, give our team a call today! We would love to put you in touch with a lender to discuss your options, as well as help you sell or find your next property!

To learn more about taking advantage of the equity you have built up, take a look at this article from Keeping Current Matters.