Accessing Equity Inside Your Homes

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If you’re a homeowner, the value of your home has likely skyrocketed over the last 18 months.

Combine that with the fact that interest rates remain at all-time lows and you’re left with an important question as a homeowner: what should you do with all this newfound equity inside your home?

In this video Michael Riney, a financial advisor at Wealthquest, discusses a few ways in which homeowners can access this equity. Before moving forward though, you have to consider three things.

First, you need to understand what your new payment schedule will be like if you tap into the equity of your home. Can you afford the increased monthly payments and do they fit within your current budget?

If you can’t afford these new payments, then now might not be the right time to use your home’s equity.

Second, if you refinance your home to, say, a 30-year mortgage, you now have to pay interest on an additional 30 years of a loan.

Third, you have to consider the tax implications of refinancing your home. If you borrow for anything other than home improvements, you might lose the tax benefits that come with being a homeowner.

The two primary ways in which homeowners can use the equity in their homes are a cash-out refinance or Home Equity Line of Credit (HELOC).

With a cash-out refinance, you receive a new mortgage that pays off the current balance on your existing mortgage. The difference between your new mortgage and your current balance is paid to you in cash.

The second option, a HELOC, is similar to a credit card. You have a pool of funds that are available to you that you can draw whenever you want and you make monthly payments based on how much you draw from these funds.

Please Note: No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience the same or a certain level of results or satisfaction if WQC is engaged, or continues to be engaged, to provide investment advisory services, nor an endorsement of WQC by a current or past client.

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