Building Equity for Your Future
Dear Clients:
Equity in your home is a great thing. It can serve many purposes:
First and foremost, it is an excellent security blanket. If you ever get in financial trouble, you can always sell your home and cash out to relieve your financial burden.
Secondly, homeownership has proven to be a great way to build savings. Equity grows through home appreciation, mortgage amortization, and home improvement. In many cases, homeowner’s net housing expenses after taxes are lower than the rent that their property could command.
Many would argue that equity is not liquid, but I would counter with the fact you can sell your property to realize your equity. You can also always borrow against your equity, either in a cash out first mortgage, or a HELOC (Home Equity Line of Credit).
This brings us to the discussion about HELOC’s. It is typically our recommendation that all homeowners (who can qualify and act responsibly with their HELOC) should have one. It is an excellent, and inexpensive, source of liquidity for those responsible homeowners who make good decisions with them and invest wisely. Good decisions include improving property (i.e., new roof, kitchen/bath remodel, etc.), making necessary medical bill payments or car repairs when cash is tight.
It is important to remember that at some point you might not qualify for an equity loan on your home, but you might need to tap into your equity, leaving you with the only other option of having to sell your home to raise the cash. Getting an equity line while you can will give you a very nice security blanket. Remember, you are not charged interest on the unused portion of your equity line. I use mine when I find a good investment, then pay it off, pocketing the profit on this arbitrage play. Lastly, most equity lines are cost free to the consumer, other than a $50-$100 annual fee, and a $350 closure fee, when you shut it down for good.
If you have been thinking about getting one, we are happy to consult with you and give you some good recommendations where to start. Reach out to us today: kthayer@rfmoc.com
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