3 Ways to Utilize Your Home Equity for Financial Gain

Home equity is a great option to make more money without selling your current property.  Although your investments can still be risky, and there’s a chance you could put your existing property in financial danger if you’re not careful, it’s often worth it for the fantastic wins you can gain. 

This is a rundown on what home equity is and how you can use it to further your investments.

What’s Your Home Equity?

Home equity is the share of your home that you’ve already paid off and own versus the amount that you still owe on your mortgage.  Breaking this down further, if you bought a house for $500,000 and your mortgage still has a balance of $100,000 left, you have an equity of $400,000, or 80% of your home’s value.

If you’ve taken out another mortgage against your home, that amount will also be taken out of your equity; the only thing that’s equity is what you own and have paid off.

Home Improvements to Add Value

If you want to put your home equity to good use, consider borrowing against it to create a property that does more and looks even better.  Ask yourself ‘what is my home worth’ and decide if that number is what you want to hear.  If not, you can use your home’s equity to build more value into it and create a space that you can eventually sell for far more than you could before.  

Make sure that if you do this, you take on investments with better returns, like replacing a garage door or doing a minor repair on a kitchen.  Any major overhauls won’t do you any good: keep in mind that you shouldn’t spend more than 10% of your home’s value in any one room. 

Down Payment for an Investment Property

If your equity is high enough, consider using it to buy another property.  This doubles the buildings that you’re invested in and ensures that you have the chance to make far more money in the long run.  Of course, this is only going to be possible if you’ve paid off a good chunk of your home, if you have a great payment history, and if you can find the right property.  If this is one of the first homes you’ve purchased, don’t risk your money on it.

Starting a Business of Your Own

Although becoming an entrepreneur is part of the American dream, many never get the upfront funds it takes to be able to foot the bill.  Instead of worrying about getting the amount you need from investors: consider using your home’s equity towards it.  Although you’ll still have to pay it off, if you’re confident enough in your business plan, this can be a great way to get it started.

Your Equity Is There When You Need It

You bought your home, and you’ve worked hard to pay it off bit by bit.  If you want to use that money, that’s fair and you should be able to.  Consider contacting a lender to figure out the next steps!

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