Exploring Four Methods to Leverage Your Home Equity

For homeowners, it's highly likely that your home equity has experienced substantial growth in recent years. This equity accumulates gradually as property values increase and you make progress in repaying your home loan. Given the surge in home prices during the remarkable ‘unicorn’ years, your gains are probably more substantial than you realize.

As indicated by the most recent findings in the Equity Insights Report by CoreLogic, the typical homeowner currently possesses over $274,000 in home equity. This substantial amount of equity can play a pivotal role in accomplishing specific objectives. As outlined in a recent piece by Bankrate:

"Despite the significant challenges posed by the pandemic, a positive outcome for homeowners emerged in the form of substantial equity growth. It's crucial for every homeowner to grasp the mechanics of home equity and its potential applications."

Here are a few examples of how you can put your home equity to work for you.

1. Buy a Home That Fits Your Needs

If your present living space no longer aligns with your requirements, it could be a suitable moment to contemplate relocating to a larger residence. Conversely, if your current home feels too spacious, the option of downsizing to a smaller dwelling might be appealing. In either scenario, your equity can serve as a valuable resource for a down payment on a property that better suits your evolving lifestyle. Collaborating with a real estate agent can assist you in determining the extent of your equity and how best to apply it when embarking on your next home purchase.

2. Reinvest in Your Current Home

Opting for renovations presents an excellent choice if you desire to transform your living area but are not prepared for a relocation just yet. Engaging in home improvement endeavors provides you with the flexibility to customize your home according to your preferences and individual flair. Nonetheless, it's crucial to take into account the enduring advantages that specific upgrades can confer upon your home's value. Relying on the expertise of a real estate expert can furnish you with valuable guidance regarding which improvement projects to emphasize in order to maximize your future resale returns.

3. Pursue Personal Ambitions

Your home equity can also function as a catalyst for bringing your lifelong aspirations to fruition. This might involve channeling funds into a fresh business endeavor, securing your retirement, or financing further education. While it's advisable to avoid employing your equity for frivolous expenses, utilizing it prudently for a purpose that holds significance and influence can genuinely impart a transformative effect on your life.

4. Understand Your Options to Avoid Foreclosure

"Currently, the count of foreclosure filings remains lower than the standard level, alleviating concerns about an inundation of foreclosed properties entering the market. Nevertheless, there continue to be instances where homeowners undergo the foreclosure process annually. Should you encounter financial hardships, it's imperative to possess a comprehensive grasp of your alternatives and the potential aid offered by your equity. Your equity can function as a fiscal buffer, accessible during moments of unanticipated difficulties or unforeseen events that might hinder your capacity to fulfill mortgage payments promptly."

"In an article, Freddie Mac elaborates on this concept:"

"If the optimal choice for you involves leaving your home, selling with equity can be a favorable route. This entails utilizing the funds generated from selling your home at a price surpassing the outstanding mortgage balance to settle your remaining mortgage debt."

Bottom Line

Your equity possesses the potential to be a transformative factor in reinvesting according to your necessities, chasing after your aspirations, and even providing a safety net against foreclosure amidst challenging periods. If you're uncertain about the extent of your home equity, reaching out to a nearby real estate expert can initiate the process of devising your upcoming strategies.