Building equity in your home is part of what makes your home as valuable an asset as it is. Most people don’t have that kind of money sitting in bank accounts just waiting to be used. While it’s not always a good idea to take out loans against the equity in your home, there are some ways you can use it to your advantage.
Buy an Investment Property
Investing in real estate is often considered a good way to start building wealth and moving towards becoming financially free. Of course, that requires you to have purchased a property to invest in. Coming up with a downpayment on a new investment property can be challenging, but if you already have enough equity built up on your home, you can use that equity to purchase a property. Once you’ve purchased your investment property, you can rent it out to regular tenants or use it as a short-term vacation rental to generate some extra income.
Add Value By Renovating
Did you know that you could use the existing equity in your home to create more of it? Renovations have the potential to add value to and build equity in your home. A finished basement can add significant value to your home. So can upgrading your kitchen and bathroom. Such renovations don’t come free though, and unless you’ve got a decent amount of savings set aside for home improvement projects, you’ll need to find a different way to fund them. Consider taking out a home equity line of credit, or HELOC to cover the costs of your renovations.
Funding Your Retirement
Many people find themselves approaching retirement and wondering how they are going to pay for their living expenses. There are a variety of options for generating income in retirement, but a lot of them require you to set them up years in advance, if not decades. A reverse mortgage may be a good option for you to provide additional income for you in retirement. Carefully consider the pros and cons of reverse mortgages before deciding whether this option is right for you.
Your home has the potential to be an incredibly valuable resource. Depending on how much equity you already have in your home, you could use it to purchase an investment property, add value to your current home through renovations, or even use it to fund your retirement. Consider carefully how much equity you currently have in your home and how you can make it work for you.
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