One of the best benefits of being a homeowner is building equity with each monthly mortgage payment instead of paying your landlord’s mortgage. In addition, just living in a home will earn you equity in your home outside of your mortgage payments as your home’s value appreciates. In fact, Idaho homeowners saw a $48,000 average equity increase from February 2020 to February 2021. That was 2nd highest in the country after California. The national average equity gain was $26,300. The more equity you gain and the longer you live in your home, the more it can positively impact your life.
Equity acts like a savings account for your home that you can access if/when you need to. And, like any bank savings account, there are sensible ways to use it to tap into it to bring you the most benefits.
Pay for financial hardship
Life throws you a curveball sometimes, and that curveball is usually expensive. Job loss, medical emergencies, and car accidents/repairs are the most frequent causes of sudden expenditures. If it comes down to it, you can draw from your home’s equity in a Home Equity Line of Credit (HELOC) to help pay for these bills without dipping into credit cards or clearing every penny from your savings and coming up short. In addition, this could open the door to refinance your house or restructure your loan. Your loan officer can help explain your options.
Starting a business
Some of the biggest businesses in the world were started in a garage: Apple, Hewlett Packard, Disney, and Yankee Candle to name a few. The equity in the garage and the home attached to it helped provide some of the seed money to get that business off the ground. Since you have realized the dream of being a homeowner, why not use that dream to help kickstart your business dreams into reality?
HELOCs can also be used to help improve the home. A new deck, a kitchen facelift, or a bathroom overhaul can all be paid for with your home’s equity. This also works out really well because interest rates on HELOCs are generally lower than other personal loans, which will make payments easier. When the renovation is complete, your home will be worth more money, which gives you extra equity. It’s a win-win!
Investing in someone’s future
Your home is a fantastic way to help invest in a loved one’s future. First and foremost, it’s a way for your kids to have a safe and secure place to grow up. Secondly—and more to the point—many homeowners use their home’s equity to invest in their children’s college education to help pay rent, tuition, and room and board. In addition, many parents help their kids purchase a house with funds drawn from their home’s equity. According to George Ritu, senior economist for Realtor.com noted:
“52% of Americans who bought their first home in 2020 said they got help with their down payment from friends or family. The number one lender? Their parents.“
Your home is an investment that works for you and can come in clutch when you need it most. Every mortgage payment you make is another step toward paying it off and is another deposit into the savings account you own.