Vanguard Properties
Paying off credit card balances and consolidating debt are some of the most common ways homeowners use their home equity, but there are plenty of alternative ways to get equity out of your home.
The longer you make payments on your mortgage, the more your equity grows - giving you more power to use that value to your advantage.
Here are some other great ways you can benefit from building equity:
Cash out refinancing lets you use equity by getting a new mortgage. Essentially, you replace your current mortgage loan with a higher amount, and receive the difference in cash. The cash is tax-free and can be used for anything you need.
A home equity line of credit or HELOC is a second mortgage with a credit amount you can draw from when needed. HELOCs are similar to credit cards in that you only pay for what you actually use until the designated draw period ends.
A home equity loan is another second mortgage option, complete with a separate monthly payment. These loans often have higher interest rates than your initial mortgage, but use your home's equity as collateral.
While similarly named, home equity loans and HELOCs function differently. With an equity loan, you get a lump sum of money at the beginning and make payments back over the life of the loan. A HELOC, by contrast, lets you draw whatever amount you need during a fixed period.
The key difference is with a loan, you'll have a regular monthly payment with a locked-in interest rate. With a HELOC, your payments and interest rates can vary.
When is it better to use a HELOC versus a loan? The important difference is flexibility. A HELOC allows you to pay for variable expenses and emergencies, and can be a great benefit for long-term costs like ongoing remodeling or renovation projects.
Consider all details of your financial situation when deciding how to use your home equity. Based on your goals and limitations, you can find the best possible way to benefit from your investment.
Selina Zhao is a tech savvy real estate agent who brings over the top-notch marketing strategies, presentation, and negotiation skills to her clients. Selina always stays on top of the real estate market trends and stats. She applies strategies into different market situation and empower her clients to achieve their ultimate goal. During the first year of her real estate career in the Bay Area, she achieved an impressive $22.8M in sales. Selina’s experience on real estate sales ensure her clients get the care and attention they need as they make the crucial decision of buying and selling properties. Selina is vowed to provide excellent service, communication, and always an advocate for her clients.
Selina loves real estate, her career blended in perfectly to her daily life, and she loves to help others to achieve their American dreams. She works restlessly to get the work done. Immigrated from mainland China in 2007, graduated from University of Miami, Selina established her own online marketing company and her real estate career in Miami, Florida before moving to San Francisco in 2017. Her soul of entrepreneurship and cares for others encouraging her to pursue to be the best in the industry. Selina is also a former Miami HEAT video producer, who witness the team winning their 2012 NBA championship at the courtside.