5 Common Ways On How You Can Use Your Home Equity


There are many reasons – good –or bad, why homeowners choose to borrow against their home equity. With a house being a considerable amount of investment, it’s only natural to think about using your equity as financing to fund many endeavors.

The great thing about tapping on your home equity is that you can borrow up to 80% out of the loan. You can get a lump sum or a line of credit, depending on the type of home equity loan you applied for. But what are the most common ways homeowner use their home equity?

Home Improvements With High ROI

According to experts, the best way to use your home equity is by improving your home. Take note that this is only applicable to projects that won’t only boost your home’s aesthetics, but its value as well. If you’re after projects that can give you the highest return on investment possible, go for kitchen remodeling, bathroom renovations, attic or basement remodeling, and living room additions.

Purchase A Investment Property

As a general rule, using a home equity loan to fund something that can add value or income to your household is an excellent way to spend your equity. An investment property can either be residential homes or commercial properties that generate revenue. The great thing about owning an investment property is that most properties appreciate over time. You get to manage the estate, receive rental income, write off numerous taxes, plus your tenants get to pay for your mortgage.

Start A Business

A business venture can be an excellent way to spend your equity, but there are always risks when owning and running a business. For one, not all businesses thrive and succeed. Some even face bankruptcy only after a few years. When using your equity for a startup business, make sure only to borrow the amount you need and can afford to pay back. You don’t want to risk foreclosure and bankruptcy at the same time.

Emergency Funds

Did you suddenly lost your job, needed to pay for unexpected hospital bills and other emergencies that require a considerable amount of funds? Then you can try to apply for a home equity loan. If qualified and approved, you can get a lump sum of cash you can use as emergency funds. However, take note that there are texas home equity loans rules to take note of. One is that the title will be on a cash-out status. Such texas home equity loans rules state that once you tap on your home equity for whatever reason, it will remain a checkout until you pay the loan in full.

Debt Consolidation

If you have several credits with outstanding balance and interest rates, then it’s time to think of ways on how to consolidate your debt. Taking a single loan to pay for your existing ones can be the right choice – only if you have a solid plan on how to repay your lender. You get to choose between a Cash-Out Refi or a HELOC when tapping your home equity for debt consolidation.

Good Read: Home Equity Loans: The Types, Pros and Cons What you need to know before applying for a home equity loan.

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