Although mortgage rates are creeping up, they’re still very low.
So now may be the right time to discuss with your financial and mortgage advisors how you can use the equity in your home to further your financial goals.
They can help you find the approach that’s right for you.
Tapping your equity
There are a couple of ways you can take cash out of your home, and many places you can then invest it.
The first is a cash-out refinance of your existing mortgage, whereby you replace your existing mortgage with a new one, and pull out cash in the process. Typically, this approach comes with a lower rate than the second option.
This option involves some type of home equity loan or line of credit. If you go that route, you’ll then have two mortgages. Check with your tax professional to see if any of the interest on these mortgages is tax deductible.
Investing it
With cash in hand, here are two of many paths you can take to invest it and make it grow. The first is in some type of investment vehicle that your financial pro can recommend. Getting a rate of return on your financial investments that is greater than what you pay each month on your mortgage is one good way to build wealth over time.
Or you can invest the equity in the purchase of a rental property that will produce a monthly stream of income. Real estate has historically been a great investment, and this is a good way to prepare for retirement. If this is the right approach for you, your mortgage pro, real estate agent, and other members of their teams can help you by
- researching current and future trends in the rental market you’re interested in,
- running a return-on-investment analysis, and
- finding and working out the details of your purchase.