4 Ways to Use Your Home Equity

If you’ve owned your home for a few years, there’s something you’re going to want to know more about – and that’s home equity. If you’re not familiar with that term, Freddie Mac defines it like this:

“..your home’s equity is the difference between how much your home is worth and how much you owe on your mortgage.”

This means that your equity grows as you pay down your home loan and as home values climb. While it’s true home prices can rise and fall in any given year, on average, your home value increases the longer you own it. When the price of your home climbs, typically so does your home equity. Here’s why that price growth is good news for you.

In the latest Equity Insights Report, Selma Hepp, Chief Economist at CoreLogic, explains:

“With price gains continuing to help homeowners build wealth, equity has reached a new high and regained losses that resulted from declines last year. And while the average U.S. homeowner gained over $20,000 in additional equity compared with the third quarter of 2022, some markets are seeing larger increases as price growth catches up.”

Here are four ways of how you can put your home equity to work for you:

1. Buy a Home That Fits Your Needs

If your current space no longer meets your needs, it might be time to think about moving to a bigger home. Conversely, if you’ve got too much space, downsizing to a smaller one could be just right. In either case, you can put your equity toward a down payment on something that fits your changing lifestyle.

2. Reinvest in Your Current Home

If you’re not quite ready to move, you can use the equity you have to improve your current home. However, it is important to consider the long-term benefits certain upgrades can bring to your home’s value. Consult with a real estate agent to determine which projects to prioritize, ensuring the highest return on your investment when you decide to sell in the future.

3. Pursue Personal Ambitions

Your home equity can act as a driving force in turning your lifelong aspirations into reality. This might involve channeling it towards a new business venture, funding your retirement, or supporting education. While it's advisable to avoid using your equity for unnecessary expenses, using it responsibly for meaningful and impactful purposes can truly make a difference in your life.

4. Understand Your Options to Avoid Foreclosure

While the number of foreclosure filings remains below the norm, there are still some homeowners who go into foreclosure each year. If you’re in a tough spot financially, having a clear understanding of your options can help. Equity can act as a cushion if you’re not able to make your mortgage payments on time.

Bottom Line

If you want to know how much equity you may have in your home, please connect with your local WESTconsin Realty agent. Our professional REALTORS® can provide you with a comparative market analysis to see how much equity you may have in your home. Then, let’s talk through how you can use it to help you reach your goals.