Your home isn’t just a place to live. It’s your safe space. A place full of dreams and memories. But did you realize it’s also a valuable financial asset that can help you achieve your real estate goals? If you’ve been thinking about purchasing a second home or investment property, the equity you’ve built in your primary residence could be the key to making it happen.
What is Home Equity?
Home equity is the difference between your home’s current market value and the amount you still owe on your mortgage. As you pay down your mortgage and your property value appreciates, your equity grows. This equity represents real wealth that you can potentially access to fund other investments.
How to Use Your Equity for Property Purchases
When it comes to tapping into your equity for a down payment on a second property, you have options.
- Home Equity Line of Credit (HELOC): This revolving line of credit allows you to borrow against your equity as needed, paying interest only on what you use. HELOCs typically offer variable interest rates and flexible repayment terms.
- Home Equity Loan (HELOAN): This option provides a lump sum with a fixed interest rate and predictable monthly payments over a set term.
- Cash-Out Refinance: This involves refinancing your existing mortgage for more than you owe and taking the difference in cash. This is a good option when interest rates are favorable. Many homeowners took advantage of historically low rates between 2020 and 2022. As rates have increased, HELOCs and HELOANs have become much more popular.
Benefits of Using Your Equity
Using home equity for property investment offers several advantages. For starters, it gives you the access to substantial funds without liquidating other investments or draining your cash reserves. The interest on home equity loans may also be tax-deductible when used for investment purposes, though you should always consult with a tax professional for specific guidance.
Additionally, this approach allows you to leverage your existing real estate investment to build a larger portfolio, potentially accelerating your wealth-building journey.
Moving Forward
If you're ready to explore how your home equity can work for you, Spring EQ can help. We offer a variety of flexible solutions tailored to your specific needs. On top of that, our dedicated team will work with you every step of the way. Want to see how much you qualify for?
Please Note: Spring EQ does not provide tax, legal, investment or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, investment or accounting advice. You should consult your own tax, legal, investment and accounting advisors before engaging in any transaction.