What is the Best Option for My Home Equity?
Even in this market, hanging onto your home equity will continue to rise. People are asking what they should be doing with their home equity. Here are some options you may consider and decide for yourself if any of them make sense for your lifestuyle.
- Do nothing and sit on it.
The first and most obvious option is to do nothing. Not only is this the path of least resistance, but it is also probably the least risky. You don't have to change anything you are goin and it will continue to provide you with equity, as long as your home continues to increase in market value and you continue to pay down the principal balance of your mortgage. This is a good way to create a forced savings plan and as long as you don't have an interest only loan you can basically keep paying into your self.
- A more aggressive approach
Even though houses are designed to house people and not cash, some may prefer a more agressive approach to the use of their equity. It's not a good idea to use equity in a home for disposable items such as cars and boats but other have a different approach to access and manage the equity in one's home, thereby conserving and maximizing liquidity, safety, rate of return, and tax deductions.
Another option is to use the equity in your home to consolidate non-preferred debt (this is debt that has no tax benefit attached to it). This does not mean you should use your equity to pay off debt only to incure more but to be responsible in your equity management. And many times, the first step to achieving financial freedom is to reposition and restructure your existing debt.
A fourth option is to reposition the equity in your home to take advantage of available investment opportunities. This does not mean to throw caution to the wind, but there are many ways to take advantage of the same concepts under which our banking system operates, a system that simply says, if you borrow at one rate, you need to invest at a rate that is equal to or higher than your net cost of borrowing. There are several ways that this can be accomplished in a very safe environment using investment vehicles such as tax-free municipal bonds, investment grade life insurance contracts and many others. Adding additional Utah real estate investments to your portfolio can be another way that you can benefit tremendously from this equity repositioning.
Because great care needs to be employed when you consider using a mortgage as a financial planning tool, it is critical that you involve the collaborative efforts of a mortgage professional along with a financial planner, CPA and possibly an estate attorney before you implement any of these strategies.
For more information on how to wisely use or invest your home equity or if you are thinking of using it for expanding your Southern Utah real estate portfolio, give us a call. We have new listings and excellent opportunities popping up every day! Our team is dedicating to helping you with your investements all along the way!
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