How to build wealth with your home equity

Selling your home isn’t the only way to cash in on its value. You can pull from Equity you have built in your home Fund everything from emergency expenses to your retirement. There are several ways to tap into your home equity, including Home equity loan, Home Equity Lines of Credit (HELOCs) And Cash-out refinancing.

While many people turn to home equity to cover immediate expenses, you can use it to set yourself up for financial success down the road. In this article, we’ll explore how your home equity can help you build wealth for years to come.

You can now explore your home equity options here.

How to build wealth with your home equity

Here are four ways you can use your home equity now to help you build wealth for the future.

Pay off the debt

High-interest debt can weigh you down for years, if not decades. In addition to paying back what you originally borrowed, you could end up paying thousands of dollars in interest. This is money you can spend towards other financial goals, eg Build an emergency fund or Stock investment. By using your home equity to pay off high-interest accounts, you can save on interest and pay off your debt faster.

Home equity loan rates Currently around 7% and HELOC rates About 7.8% to 8%. Contrast that with credit card rates, which are around 20%, and the potential savings are obvious.

Explore current home equity rates here to see what you qualify for

Make home improvements

Benefits of using home equity Home Repair and Home Improvement is doubled

First, home improvements such as fixing an old roof or upgrading a kitchen can increase the value of your home. It helps you Build additional equity You can draw from the future. This means you can get more when you sell it for your home

Second, if you use a Home equity loan or HELOC Funding for home improvements, you may be able to deduct the interest come tax time.

“Interest on home equity loans and lines of credit is deductible only when the borrowed funds are used to purchase, construct, or substantially improve the taxpayer’s home that secures the loan.” The IRS states “the loan must be secured by the taxpayer’s principal home or second home (qualified residence) and meet other requirements.”

Make a down payment on an investment property

An investment property can provide you with a regular source of income. You can draw on your current home equity to make a down payment on a rental property, commercial investment property or fixer-upper property that you plan to flip.

Just make sure you understand what happens Real estate investment. For example, Own a rental property This means tenant screening, property maintenance and fielding repair requests. You will need to devote personal time to this or pay a property management company to do it for you.

Find out how much you can borrow here.

start a business

Starting a business is another way to generate future income. Whether you want to open a storefront, start an online business, or open a franchise, your home equity can provide you with startup capital, saving you from having to resort to personal financing or taking out a small-business loan.

Bottom line

Building wealth can be a great way to use your home equity. As with any financial decision, be sure to weigh the pros and cons Every home equity option Find the best one for you. For example, a home equity loan is generally good for large, one-time expenses (such as a down payment on an investment property), while a HELOC is generally good for ongoing expenses (such as running a business).

Start weighing your options by Calculate how much equity You have your home and compare your home equity options here.