Top 5 Things You Can Do with Your Equity
Ready for a pretty crazy statistic? Over 70% of home owners have over 50% equity in their home. Think about that for a second. If you own a home worth $300,000 chances are you have equity upwards of $150,000! Over half of homeowners have a lot of money sitting the value of their home!
That’s pretty wild, however when we think about the crazy last three years we’ve had in real estate, it makes sense. 2020 and 2021 were completely unprecedented, yet somehow home prices have refused to make a significant drop if at all depending on the market.
What is equity?
Some of you may be wondering what to do with all that equity, and before we get into it, let’s be clear about what equity is. Equity is the difference between the amount of money you owe on your home and the amount of money your home is worth. That second number can be a bit ambiguous, but an appraiser or Realtor (like us) can help you figure out what that number is. Find out how much your home is worth.
What to do with your equity?
One last thing before we give you our top five and that is, in the state of Texas, if you decide to refinance your home, you can expect about 80% of that value to actually make it to your pockets. For example, if you owe $100,000 on your mortgage and your home is worth $200,000, then you can expect to get $80,000. Click here to learn more about how it works.
Top 5 things to do with your equity…
5. Home improvements! It’s a great opportunity to get to some of those repairs you were hoping to get done when you first bought your home. Be advised. Have a plan and you don’t have to do everything at once. Your money won’t disappear if you have it sitting in a savings account until you’re ready for your next project. Also, a good contractor is hard to come by so take your time to find the right one for you and your home improvement needs.
4. Invest it. While we wouldn’t suggest going through the hassle of getting your home refinanced ONLY to stick it into a different type of asset, however we do want you to be thinking differently about the benefits of higher interest rates when it comes to banking. A high interest savings account, or HISA, means that your savings accounts are making you more money without you having to lift a finger. Again, not something worth refinancing your house for, but maybe with the remaining money you have left over from your projects, you can stick it in a HISA. To learn more, visit Destanie’s brother, David’s website. He’s a financial advisor. Learn more!
3. Pay off debt. A good windfall of cash is a great opportunity to give yourself a raise in monthly expenses. Meaning, by paying off some debt, a credit card, hospital bills, car note, student loans, or whatever you need, you can keep that cash to do something different, invest it, or add it to a savings account.
2. Start a business. Calling all entrepreneurs! Don’t spend your days wishing you would have. If you’ve been hoping to start a business, why not pull the trigger to finally open up your favorite franchise. From brick and mortar to online platforms, you can start your side hustle and finally start following your passions. We found this really cool video on how to have a digital retail store and not have to worry about overhead. Check it out here!
1. Purchase property. It is always a good time to buy real estate and in this weird market that we are currently in, you can get really creative around building your investment portfolio. This includes seller finance, getting more in closing costs, and getting savvy with qualifiable rental income with a loan program called DSCR. This is a loan product that allows you to get approved for a home loan on an investment property based on the potential rental income. Message us directly to learn more about this program.
Honorable mentions:
Pay for a lavish vacation
Make extra mortgage payments
Build your emergency fund
Hope this helps! Call us if you have any questions about how this could work for you. We have great lenders we work with that we could recommend. Until next time!
- Des & De’Ron