Home values have increased considerably in recent years in many areas, giving homeowners an avenue to tap their home’s equity to make renovations or otherwise improve their overall financial picture. Here are a few things you can do with the equity in your home.
Home improvement is one of the most common reasons homeowners use the equity in their home. Besides making a home more comfortable for you to enjoy, upgrades could raise the home’s value and draw more interest from prospective buyers when it’s time to sell.
But if you plan to sell the house, be mindful of the types of home improvements you make and their projected return on investment. There’s typically a limit to how much you can get over the market value on a house. Most real estate folks will say new paint and carpeting. Aside from that, some upgrades to the kitchen and the curb appeal can help the value of the house.
Paying for education to potentially put yourself in a higher income bracket or fund your child’s education is a great reason to tap into the equity in your home. It can also make sense to pay off student loan debt using the equity from your home.
Pay off debt
A cash-out refinance can be used to consolidate high-interest debts to a lower interest rate. Homeowners sometimes use the equity in their home to pay off other personal debts such as a car loan or a credit card. Interest rates on credit cards are often as high at 24%. In addition, the interest is compounded, meaning you pay interest on the interest that has accrued. Often times this leaves cardholders struggling to pay down the balance, only paying the minimum payment each month and never lowering the balance. In this case, a cash out refinance could consolidate the credit card debt into one, lower monthly mortgage payment, improving cash flow and credit scores.
Anyone who has ever had an accident, a medical bill, or an unforeseen change in income knows how important it is to have an emergency fund. A refinance can help you lower you rate, lower your payment, and pull out cash reserves that you may need in case of an emergency at the same time.
If you’re looking to use the equity in your home, fill out the form below for a no cost, no obligation consultation!