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The 3 Smartest Ways to Tap Your Home Equity

Homeownership
is one of the best ways to invest in your financial future, especially as your
home equity grows. Home equity is a form of forced savings that can work to
your advantage as the value of your home appreciates.

 

There’s no
doubt that there’s a right way to access your equity, and the 3 smartest ways
are as follows:

 

Second Mortgage

 

This type
of home loan is the most structured, and the interest rate is usually fixed.
The rate is considerably higher than the first mortgage, though. However, it’s
often lower than that of a credit card, making it an appealing alternative for
those with high interest cards. These loans closely mirror a standard mortgage,
and are also known as a home equity loan.

 

Home Equity Line of Credit (HELOC) 

 

While this
type of loan is typically the most flexible, it can be dangerous if you aren’t
great with managing your money. You can draw on the line of credit when you
need it with a checkbook or debit card. As you can guess, it means you have
access to the funds in the same manner as a credit card. So, if you already
have a few maxed-out cards, you probably want to run far away from this one.

 

Cash-out Refinance

 

This type
of loan does not necessarily involve a second loan, but the costs associated
can be very high in some cases. With this loan, you get cold, hard cash in
exchange for taking on a larger mortgage. You’ll need to qualify for the new
mortgage amount and most likely be viewed as a risky borrower to lenders.

 

What You Need to Know

 

When equity is rising, as it is today, you may have more invested in your home than you

realize. If you’ve been considering making a move – whether that’s going
back to school or paying off some credit debit at a lower interest rate – it’s
a great time to reach out to a real estate professional to learn how to put
your equity to work for you.

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