“Homeownership has cemented its role as part of the American Dream, providing families with a place that is their own and an avenue for building wealth over time. This ‘wealth’ is built, in large part, through the creation of equity…Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”
The past year may have had its challenges, but there have been some silver linings. Home values, for example, have risen rapidly resulting in huge equity gains for homeowners. The average amount of equity that homeowners have gained in the last year is over $33,000 and the average homeowner has over $216,000 in equity (Source: CoreLogic).
These gains in equity are great news for homeowners. According to Jay Buten, VP of Production for Sibcy Cline Mortgage Services, “Now is a great time for homeowners to take advantage of the increased values and utilize the equity to improve their overall financial picture.”
There are many ways that homeowners can choose to use their equity to give themselves a leg up financially, from debt consolidation to college expenses. “It’s a great time for homeowners to evaluate their personal finances and look for opportunities to benefit from the increased equity they have gained.” said Buten.
Think you might be able to use your equity? Here are 7 smart ways to consider:
1. Move Up to Your Dream Home
One of the most common ways that homeowners use their equity is to sell their home in order to buy or build something more suitable to their needs. Sellers can use the cash they make at closing for their next down payment OR take out a bridge loan that allows them to borrow that cash before they close to make their down payment on a new home.
2. Home Improvements
Improving your home can further increase its value and your equity, depending on the type of improvements you choose to do.
3. College Costs
This can make sense when the interest rates are lower than other sources for borrowing money for education.
4. Debt Consolidation
Homeowners can save money by using equity to pay off high-interest debt.
5. Long-Term Investments
Some long-term investments, such as a second home or rental property, can be worth drawing on your equity.
Rather than using credit cards or other high-interest sources to fund a wedding, consider drawing on your home equity to celebrate this long-term commitment.
7. Start a business
Starting a business or investing in a current one can bring a huge return on the investment of your equity.
Ready to get started on buying or refinancing? Reach out to one of our Sibcy Cline loan officers!