Leveraging Your Home's Value: What To Do With Home Equity
what home equity is, and what to do with it
Buying and owning a home can be your ticket to developing your personal wealth. But to realize those dreams, there are a few do's and don'ts when it comes to your home equity. Today I'm explaining what those are, how to understand your own home equity, and tips to get the most out of your home ownership.
Introduction
Hey, everyone! It's Brent the Broker here, and today we're going to dive into the world of home equity and what you should do with it. Before we jump into today's discussion, make sure to hit that subscribe button, turn on your notification bells, and if you like what we're doing, don't forget to drop a like or comment with your feedback. We love hearing from you because our goal is to bring value to you. Stick around until the end of the video for our buyer and seller pro tip of the day.
What is Home Equity?
Alright, let's start with the basics: What exactly is equity? It's the value of your home minus what you owe on it. So, if your home is worth $800,000 and you owe $600,000, the $200,000 difference is your equity. But why is your equity so important? Well, it's a significant part of your net worth. In the process of buying and selling homes, our aim is to help you build wealth through home ownership.
How to Increase Home Equity
Now, there are two primary ways to increase your equity. First, you can make your home worth more, and second, you can reduce your debt. To reduce your debt, you can make extra payments or choose a shorter mortgage term. This way, every payment you make goes more toward reducing the principal, and less toward interest.
Improving your home can also boost its value. Renovations can make a substantial difference. Adding a pool, remodeling your kitchen, or making other improvements can make your property more appealing and valuable to potential buyers. The key is to lower your debt while increasing the value of your home.
Homeowner vs. Renter Net Worth
Why is this important, you ask? Well, the net worth of homeowners is substantially higher than that of renters. Owning a home often provides opportunities to grow wealth that you might not have as a renter. So, that's why we're discussing these things – to help you build wealth, succeed, and achieve your goals for you and your family.
What to Do with Home Equity
So, you've built up some equity in your home. What should you do with it? There are several options.
Renovate the Home: We just discussed how increasing your home's value boosts your equity and net worth. By tapping into your equity and borrowing against it, you can fund renovations or additions to make your property even more appealing to buyers.
Invest in Yourself: Consider using your equity to invest in your own skills. Education and new skills can lead to higher-paying job opportunities, helping you increase your income.
Invest in Real Estate: You can also use your equity as a down payment on another property, continuing to build wealth through real estate or other investments.
Pro Tip of the Day
Now, here's a pro tip: When tapping into your home equity, remember that it comes with costs in the form of interest and fees. Every loan has an interest rate, so it's crucial to ensure that the return on investment is higher than the cost. In other words, the return should outweigh the interest and fees you'll incur.
What Not to Do with Home Equity
One thing you should avoid doing with your home equity is spending it on things that depreciate in value. Buying cars, boats, motorhomes, or items that lose value over time can deplete your home equity and make you poorer in the long run. Our goal is to help you utilize these tools to build wealth and become wealthier.
That's a wrap for today, folks. If you found this information helpful, consider subscribing to our channel. And don't forget to drop a comment – we love hearing from you. Thanks for joining us, and we'll see you next time.
