One of the huge incentives for buying a home in Irvine instead of renting is that you can build equity in a property. However, many people do not take advantage of this useful equity once they own a home. In the right situation, leveraging equity for a loan can be a wise financial move. Here are five creative and financially sound ways to use your home equity.
1. Reduce Credit Card Payments
A home equity line typically has much lower interest payments than other types of debt. If you have a lot of high-interest credit card bills, paying them off right away with your home equity can save you money in the long run. Instead of paying off several bills bit by bit with a high interest, you can just send a monthly payment to your home equity lender. Work with a financial adviser and avoid running up more credit card debt if you wish to try this action.
2. Invest in Rental Properties
If the market for rental properties is doing well, consider purchasing a rental property. Rentals can be a great source of additional income if you have the time and skills to be a landlord. Hot rental properties may require a big down payment, so your home equity can help finance this investment. Try to avoid high-risk ventures and stick with decent rental properties in a stable neighborhood to make sure your investment is safe.
3. Deal with a Recession
If there is a sudden downturn in the market, it may be a wise decision to retain your property instead of selling it at a loss. In these circumstances, using home equity can help tide you over until there is an upswing in the market. However, opening a home equity line of credit should not be used for purchasing unessential items like a vacation or a boat. It is best to only use home equity for daily expenses if you are facing an emergency.
4. Pay for College
If you have a child who is about to go to college, you may find yourself considering student loans. However, the interest on these is often higher than the interest rate for home equity loans. Take a look at mortgage refinancing and home equity loans to see if it is more affordable than the student loan options available to your child.
5. Upgrade Your Property
If your home needs major repairs to remain livable, you may be able to finance them with your home equity. This is typically a smart move if you want to upgrade your home with additions or fix essential problems like a worn-out roof. Using your equity for renovations ensures you can keep your appreciating asset instead of having to spend money on moving to a bigger or nicer property.
You can’t use equity until you purchase a property and give its value time to appreciate. If you want to find a house in Irvine, let trusted local real estate agents help. Call 714-454-6304 today to start your search.