Employ Your Home Equity

If you’ve got a home loan the chances are you have some equity in it. Equity is the value of your property after subtracting the cost of your mortgage on your home i.e. the amount left over if you were to sell your home and pay off your mortgage. The equity in your home increases over time as you gradually pay off the initial mortgage and can also increase with property inflation, and this built up equity can be used if required at a later date for all sorts of purposes.

It’s a very bad idea to spend any equity you may have in your home on things like holidays or new cars. A much better idea is to invest the money in something that will give you a decent return on your investment and therefore grow your equity.

Home Improvement

Renovation of your home can significantly increase the value of your home, and therefore increasing the equity held in it. This also has the added benefit of also improving your living conditions and comfort. But before you decide to use some of your equity, research should be undertaken to discover what home improvements are likely to give you the best return on your investment as not all improvements made to your house will significantly improve your property’s resale value.

Kids Education

Growing and then releasing some of your homes equity is a good way of helping to fund your children’s education. Whilst not giving a financial return on your investment it can be very satisfying having the ability to give your children a decent start in life.

Improve Your Credit Score

In today’s modern world debt in one form or another such as credit cards, mortgages or loans is almost unavoidable. Unfortunately even with careful financial planning many people do at some point in their run into financial difficulties. This in turn leaves you with a poor credit history which can affect the cost of future borrowing. By releasing equity from your home and using that to help pay off creditors can help you to improve your FICO score, which will in turn potentially allow you to benefit from cheaper finance rates in the future.

Before deciding to take this route you should find out the interest rates on your savings and debts and maybe consult with a financial expert to go through the calculations. With so many variables it can become confusing about choosing the right term for your home equity loan, how much to save and assign to payments and how to consolidate.

A Word of Warning

If you fail to plan and budget properly and overstretch yourself financially your home equity could be at risk. You could potentially lose your house and even be made bankrupt. Therefore always use your home equity intelligently with plenty of forethought.

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