One of the beauties of investing in real estate is that your money is kept in a safe place where it can grow under the radar for decades. Because the equity on your home isn’t liquid, as opposed to your checking and savings accounts, it is much more difficult to access for random wants.
This provides a protective cushion from rash withdrawals. However, sometimes being able to utilize the equity you’ve built up in your home is essential. Here are some ways to do just that.
Take Out a Loan
One way to extract the equity on your home is to take out a home equity loan. These loans are generally only used to fund big-ticket items, such as a home renovation or a startup company. But remember, the collateral for your home equity loan is your home itself.
This means that you are at risk of losing your home if you can’t make your payments. You might even owe more back on your home than it is worth. On the positive side, many home equity loans charge lower interest rates than credit cards.
Sell It
Of course, the easiest way to get the equity out of your home is to sell it. When you sell your home, you will get to keep everything you have put into the principal as well as any appreciated value. You might find that you could get away with a smaller home and don’t mind selling.
Downsizing lets you pocket the difference to use for other goals. The beauty of this method is that you don’t increase your debt–you decrease it! At the same time, you get to utilize the funds from your sale however you see fit.
Refinance
Another popular method of extracting equity is to refinance. By refinancing, you can pull the money you have already put into the principal and set up a new loan for the remaining amount. In addition to giving you some needed liquid funds, you will probably also lower your monthly payments–allowing you to pocket more of your hard-earned income each month. Just keep in mind that you will have to pay several thousand dollars in closing costs if you choose this route.
When you need your equity, there are ways to get it. Of course, some of these methods will set you back financially more than others. The most financially responsible way to take the equity from your home is to downsize.
Did you enjoy reading this article? Here’s more to read. Costs That Come With Selling Your Home
