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10 Ways Homeowners Could Use their Equity

According to the latest Equity Insights Report from CoreLogic, homeowners gained an average of $51,500 in equity by the end of 2021. In some states the gain was even higher. For example, the gain in Utah was between $60 – $90K. Check with your lender or real estate agent to determine how much available equity you have in your home and get their advice on whether using some of that equity in one or more of these 10 ways is a smart move for you.


1-Buy a Home that Fits Your Needs

If your current home is either too small or too large for your needs, you could use the equity in your home as a downpayment on a home that’s a better fit. Moving into a larger home can provide extra space for a new addition to the family, an office for your new, work-from-home lifestyle, or a place for an aging parent.


Did you recently become empty nesters, retire, or simply get tired of caring for a big home? Downsizing to a home more suited to your lifestyle may mean less time on upkeep, a lower monthly payment and a reason to get rid of some of your unneeded stuff.


2-Make Home Improvements

If you love your location and want to stay put, you could use your equity to add square footage to your home. Add a bedroom, bathroom or family room, or increase the size of your kitchen. Additional square footage could add value to your home when you sell.


A major upgrade or renovation to parts of your home could also add more value. Some typical home renovations include updates to the kitchen, bathroom(s), an office, a walk-in closet, landscaping, or increasing your home’s energy efficiency through new windows, better insulation, new appliances and low-flow toilets. Some renovations add more value than others. Do your research to determine how much the upgrades will increase the value of your home.


3-Move to the Location of Your Dreams

The equity in your home and maybe more income or fewer expenses since you first became a homeowner might make it possible for you to move to the location you’ve been dreaming of. Have you longed for a cabin in the mountains, a beach house, or a home closer to your family? Whatever your dreams are, your home equity could make it possible to move to a location where you’ve always imagined living.


4-Start a New Business

According to the U.S. Small Business Administration Office of Advocacy, “There is an estimate of 31.7 million small business owners in the United States, many of them started their business with the equity they had in their home…. Small businesses created 1.6 million net jobs in 2019. Firms employing fewer than 20 employees experienced the largest gains, adding 1.1 million net jobs”. You could use your equity to invest in a new business venture. During the pandemic, many people we were either laid off or left their current jobs and are now the proud owners of a small business that they started themselves. Using your equity to start a business that you’re passionate about can potentially grow your nest egg.


5-Fund an Education

Higher education can be expensive and utilizing your equity can possibly lessen or eliminate the need for student loans. Using a portion of your growing equity to help fund a child heading off to college, or to further your own education, is making an investment in the future for someone. If your home equity interest rate is lower than student loan rates, this option can save money. It also allows you to spread the payments out over a longer period of time, which can be beneficial, especially if you expect a steady increase in income after graduation. Before you borrow from the equity in your home, be sure to research all available student loan options. Defaulting on a student loan can hurt your credit, and defaulting on your home equity loan could cause you to lose the home.



6-Pay off High-Interest-Rate Debt

Credit card or auto loan debt often has a higher interest rate, and it can affect your credit rating. You could use a home equity loan to consolidate debts to a lower interest rate, and you might get significant monthly savings that could be used to help build an emergency cash reserve.


A home equity line of credit, or “HELOC,” is another type of loan or debt. Be sure you are consolidating at a lower interest rate than the rate on your original debt and consider the time it takes to pay back the home equity loan and the interest that will accrue. It’s easy to slip back into credit card debt. If you do, you’ll end up with both home equity debt and credit card debt, a situation you want to avoid. The goal is to improve your situation, not send yourself spiraling into more debt.


7-Survive Short-Term Loss of Income

An unexpected loss of income is a common occurrence, and most people are completely blindsided by it. Using your home’s equity to create an emergency cash fund will give you peace of mind and options. Just be aware – a HELOC can only be applied for if you are employed. If you lose your job, it is no longer an option unless you decide to sell. Plan ahead for this type of sitation.

8-Start a Fund for Medical or other Emergencies

Our health insurance rarely covers all our medical needs. According to a recent survey by the Census Bureau, 11.2 million individuals were forced below the poverty line due to out-of-pocket medical expense. Refinancing your home to start an emergency savings fund can keep you from potential financial ruin due to medical debt.


Good personal financial practices include having an appropriate emergency fund on hand for any type of financial emergency. Experts recommend having enough money to last for six months to a year. A home equity loan can help build a fund to cover such circumstances. Make sure you understand the pros and cons of taking out a home equity loan and do your homework to determine if this is the best use of your equity.



You could use the equity from your home to invest in the stock market or additional real estate. In doing so, you’re betting that the returns will exceed the cost to secure the equity from your home. In more cases than not, with interest rates still at historic lows and real estate appreciating steadily, this could be a viable option for homeowners and investors.


If you think that this might be an option for you, seek advice from real estate investment experts, do your research, and remember that all investments are not guaranteed to go up in value. Do what you can to be certain that yours will, or this option might not be worth the risk to you and your family.


Save for your retirement

If you can’t regularly invest in your 401(k) or IRA, using your home’s equity can be one option to get you back in the habit of saving to meet your retirement goals. Please note that using your equity for investing can be risky. Speak with your financial advisor to ensure it is the best option for your financial future.


Consider the possilbe benefits of tapping into your home’s equity but don’t borrow more than you need, and don’t overspend. If you take the time to research the benefits and risks, your equity could help you achieve your goals. If you’re unsure how much equity you have in your home or what is the best use of it for you and your situation, connect with a trusted real estate advisor or lender and start planning your next move.