One of the best benefits of owning a home is the ability to build equity, which you can later utilize to pay for home renovations, eliminate debt, or plan for retirement. Home equity—the difference between what you owe on your mortgage and what your home is currently worth—can change over time as you pay off your mortgage and add value to your home. Here are three ways that you can use that equity to your advantage.
Renovate Your Home
Home improvements are one of the most popular ways home owners use their equity. There are many benefits that come through this option. Using your equity to renovate your home means that you’re investing in your own property and increasing its value.
After appraising the value of your home and finding out how much equity you have at your disposal, it’s time to start your renovations. Make sure to find quality contractors to help you. HomeAdvisor lets you find the right contractor in your area. If you’ve been interested in renovating your home and are ready to use your equity, this option could work well for you.
Consolidate High-Interest Debt
Another fantastic way you can put your home equity to good use is consolidating your high-interest debt. This is a good idea for several reasons. First, you’re getting the obvious benefit of starting to get out of debt. Second, this gives you the opportunity to save 10 percent or more of what you’re paying on your debt. Third, by having just one home equity loan payment, you’ll only have one interest rate. Many home equity loan borrowers are able to negotiate with their creditors before paying off their loan. For these reasons, you should consider getting a home equity loan or home equity line of credit to consolidate your high-interest credit card debt.
Plan for Retirement
If you need some extra cash for retirement, consider using your home equity. There are several ways to do this. One option is using a home equity line of credit (HELOC) to invest in real estate, such as purchasing a rental property. You could also access your equity when you refinance your mortgage and take some out for a retirement savings fund.
Renovating your home, consolidating high-interest credit card debt, and planning for retirement are only three of many good options that will help you put your home equity to good use. Consider talking to a financial professional to help you decide on the best option for you.
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