Leverage Your Home Equity to Unlock Opportunities 

For many homeowners, the equity they’ve built up in their home can be used as a valuable financial asset. As property values increase and mortgage balances decrease, home equity grows as a valuable tool that can help unlock new opportunities. Whether you’re looking to renovate your home, consolidate debt, start a business or cover education costs, tapping into your home equity can be a strategic and smart way to fund your goals.

What is home equity?

Home equity is the difference between the current market value of your home and the remaining amount owed on your mortgage. For example, if your home is worth $400,000 and your mortgage balance is $250,000, you have $150,000 in equity. Over time, as your home’s value rises and your mortgage balance decreases, the amount of equity you have in your home will grow.

Why home equity matters

Home equity grows passively, unlike many other assets – which often results in it being an overlooked source of financial power. What sets home equity apart from other borrowing solutions such as credit cards or unsecured loans is the relatively low interest rates associated with borrowing against it. With careful planning, home equity can be transformed from a dormant asset into a resource that can support your short-term or long-term goals.

Ways to leverage your home equity

1. Home Equity Line of Credit (HELOC)

A HELOC functions like a credit card, giving you a revolving line of credit based on your available equity. You can borrow what you need, when you need it, and repay it over time.

2.Home Equity Loan

This option provides a lump sum upfront, repaid in fixed monthly installments over a set term. It’s a good fit for one-time expenses such as major medical bills, consolidating high-interest debt, or funding a large purchase.

3. Cash-Out Refinance

With a cash-out refinance, you replace your existing mortgage with a new, larger loan and receive the difference in cash. This can be beneficial if you also want to take advantage of a lower interest rate or change your loan terms.

4. Reverse Mortgage (for qualifying homeowners 62 and older)

This allows older homeowners to convert a portion of their home equity into cash without selling their home. It’s a potential solution for supplementing retirement income or covering unexpected expenses later in life.

When leveraging home equity makes sense

Tapping into the equity in your home can be a smart move in some situations. It’s best suited for purposes that provide long-term value, like investing in your home, education, or business, rather than for short-term or discretionary spending. It’s also important to consider your ability to repay the borrowed funds and how it aligns with your overall financial plan.

Home equity isn’t just a number on paper, it can be a valuable tool to fast-track your progress towards your financial goals. Like any financial tool, however; it requires careful planning and responsible use. It’s important to consult with a financial advisor or speak with a Summit Mortgage Loan Officer to help you understand your options and determine the best way to align your home equity strategy with your broader financial goals.

Schedule a free consultation

A local Summit Mortgage Loan Officer has the expertise to help guide your decision-making process, answer any questions you may have, and get you approved with the best loan program for your unique situation. Find a loan officer who’s right for you.