Buying a home may be the largest purchase a person makes in his or her life. Homes are expensive, and are normally paid off over a long stretch of time. However, during this time, the money that has been put into the house can be accessed once again by the homeowner when necessary. Life is expensive, and a home is not the only large purchase a person will make in a lifetime. Education, medical bills, home renovations and various other expenses can make it difficult to afford the standard of living one desires. Accessing the money you have invested in your home, by leveraging your home equity, can then free up a significant amount of finances and provide homeowners with the financial freedom they require.

 

 

Regardless of how much of the house has been paid off, the money that has been put into the home is sitting stagnant. This means the money that has been used to pay for the house is no longer appreciating in value. The home will either appreciate or depreciate in value over time, but not based off of how much of the house has been paid off, or how much of the remaining mortgage loan there is. The home will change in value based on how desirable the home is to a buyer. This can be attributed to where the home is located, how big it is, how well it has been maintained internally and externally, and other aesthetic considerations. Therefore, taking money out of the home will not have an impact on how much it will be worth down the road, and an owner-occupier should feel entitled to access the equity that has been already invested.

 

By taking money back out of a home, you can see a significant rate of return on how that money was spent. For example, if a homeowner has a HELOC (Home Equity Line of Credit), they can use that money to renovate the home. This investment in improving the home itself would likely increase the value of the home. This investment in home improvement has potential for a high rate of return, and would otherwise be sitting without growth for as long as it takes to pay off the mortgage loan.

 

If a homeowner wants to move houses, leveraging home equity can make it possible to move directly without having to save a deposit, which can be costly and take long time. This makes moving simpler as you can often take your existing loan with you and just use your new property as collateral. By leveraging home equity, interest rates are normally much lower than that of a traditional loan or line of credit, making what you plan to use the money for far more affordable over time.

 

It is important to fully understand your finances and what you can access to build your assets over time. When a homeowner is in a stable situation and has a reliable source of income, leveraging your home equity and investing money can mean enormous growth over time.