What to do if you are EQUITY RICH
What does it mean to be “Equity Rich”? According to CNN “Sky high real estate prices have made a growing number of homeowners "equity rich," according to a report on home equity. That means they have at least 50% equity in their property, or put another way, that the amount they owe on the home is no more than half of the property's market value.” So what are your options if you are Equity Rich!
Many people are asking this question right now, one of the most popular options is a cash out refinance, where you refinance the loan and take money out. Homeowners will commonly do this to pay for big ticket home improvements like kitchen & bath renovations or replacements of expensive systems like the HVAC, windows, appliances or roofs. If it is something that will add value to your home then it is generally agreed that it is a worthy spend.
Another popular plan is to buy a 2nd home or possibly investment property that can bring in rental income and potentially become a primary residence in later years. If you know you are heading to a certain locale it is wise to take equity and invest now. You can rent the home to help pay down the mortgage or possibly pay off the home making it a positive cash flow asset.
Do you have an unexpected expense that needs money right now? Using home equity can be a good way to pay off unexpected or emergency situations. It is better to have money set aside for such expenses but if you don’t have it and you have plenty of equity it could be a sound way of making cash flow. Beware not to take out too much equity or use equity to buy lavish luxuries.
Equity in your home may also be a solid way to start a small business that you have been dreaming of. Cash out refinance can provide you a lump sum all at one time or many businesses rely on a HELOC ( home equity line of credit) to keep cash flowing through their business. It is not wise to take out more money than you can pay back, or to use money on a risky business.
You can also use your equity by selling your home and cashing out completely. Many folks are ready to downsize or relocate and the time is right to make that move. If that is the case for you then you can take advantage of the sellers market and do something different with your money and sell your primary residence. No time like the present to make some changes for the positive in your bank account.
Having equity in your home is a good problem to have and can enrich your life in many ways. It is important to consult an expert when it comes to one of the largest assets in your life. Having an experienced Realtor come in & talk to you about your options is a great way to start. I look forward to helping you unlock your potential!
